At the same time, there have been concerns that rapidly increasing credit risk transfer (CRT) activity may be leading to concentrations of risk among agents who might not be able to bear it in a more challenging environment, particularly in the case of the more complex structured credit products where investors may have been attracted by high short-term returns.
But the exchange rate, the price of the foreign currency normalised to the home currency is an important macroeconomic variable that ought to be determined by economic fundamentals and influences behaviour of economic agents. Principally because of this twin nature, the exchange rate exhibits great volatility and decouples from its value indicated by the economic fundamentals that calls for policy response.