When nobody’s listening, sometimes it pays to shout from the rooftops.
Based on the rupee’s daily pasting, the Reserve Bank of India might do well to look to the European Central Bank’s strong verbal defense of the euro just over a year ago.
In July last year ECB President Mario Draghi declared he would do “whatever it takes” to safeguard the euro’s existence.
That unexpectedly candid comment, uttered at a moment of rising market tension, wasn’t followed by concrete policy action. But markets took heed.
Sovereign bond yields in peripheral countries plunged from danger levels and the euro has rallied 10 percent since then – 8.5 percent by the end of last year.
Turn to the free-falling rupee.
It has plunged by 14 percent since the U.S. Federal Reserve signalled in May that it would soon have to slow the pace of its extraordinary monetary stimulus, which has triggered a rush of foreign investors to sell emerging market assets.