Increasing the use of local currencies in trade starting with the neighbouring/emerging market countries could mitigate the effects of adverse movement in the US Dollar. Increasing the use of local currencies in trade, however, remains a challenge, particularly when such currencies have shown sharp volatility with downward bias. Exchange rate is an important macro-economic variable which has significant impact on the real sector.
Sharp unidirectional movements in this variable in a relatively short period of time can have serious financial stability implications. All the concerned regulators who have jurisdictional interest in the exchange rate have to adopt a coordinated approach to address market volatility.