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Showing posts from October, 2011

Strong is good

In 1991, when India commenced her economic reform programme, there were really three players in the foreign exchange markets – the Reserve Bank of India, the State Bank of India and Indian Oil. Between them, they generated the bulk of supply and demand for US dollars and created the fundamentals of a foreign exchange market. Minor movements of the rupee – even by a few paisas – created news and alarm. However, things are very different today. Volatility has increased considerably and variances of 20% over a short period of a few months are not uncommon. Many economists believe that the rupee, despite its recent bear hammering, remains over-valued. Based on the Real Effective Exchange Rate Index, they argue it should trade at approximately 52 to the US dollar at the current juncture. The crux of their argument stems from the fact that India’s exporting community would become uncompetitive in the face of a strong currency. Healthy capital inflows have, in the past, kept the Balanc

In the ninth circle of hell

On Sunday, the 25th September, Pakistan’s Army Chief, General Ashfaq Parvez Kayani, summoned his core commanders for a special meeting, allegedly to discuss the security situation. This is an unusual move as meetings of core commanders are typically scheduled with a prescribed agenda. Pakistan is understandably concerned that in the wake of Admiral Mike Mullen’s comments, America may well intensify drone attacks on Pakistani soil or even worse, send in ground troops. Admiral Mullen, Chairman of the Joint Chiefs of Staff of the United States Armed Forces, in a speech to the Carnegie Endowment for Internal Peace, revealed that Pakistan’s Inter Services Intelligence (ISI) Agency had strong ties with the Haqqani militant organisation and effectively supported terror attacks on American targets in Afghanistan. Admiral Mullen’s comments are the most recent indicator of Washington’s toughening stance against Pakistan. Previously, similar sentiments were echoed by US Defence Secretary Le