On Wednesday, the Indian rupee breached the 90 mark against the US dollar. Over the past year, it has fallen by more than 6 per cent against the dollar, and to a much greater extent against other major currencies such as the euro and the pound. This decline seems to have raised concerns in some quarters. However, at the current juncture, intervening heavily in the markets to artificially prop up the rupee will not be an appropriate strategy. Exchange rates are a shock absorber. A weaker currency will help boost exports in a challenging global environment. The temptation to target the rupee around a particular level should be avoided.

A growing trade deficit, coupled with portfolio outflows, is exerting pressure on the rupee. India’s overall merchandise exports contracted by around 12 per

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