There is a danger, during currency sell-offs, of losing focus. One mistake is to treat the exchange rate as a crucial indicator of prestige. Another may be to look back on previous exchange rate crises (such as India’s in 1991, Indonesia’s in 1997/1998 or Brazil’s in 1998), and worry about losing the last war again.
It may even be that currency rates, which change throughout the working day, are reported on so intensively that they assume outsize importance. Nonetheless, the exchange rate should not dominate our thinking. For the Reserve Bank, our policy stance is clear.