Intervention in a managed float is aimed at reducing speculative attacks or sharp, unwarranted movements in the exchange rate, not at fixing the rate at a specific level or using it as the primary tool for controlling inflation or demand.
Under a managed float exchange rate system, the RBI can intervene in Foreign Exchange Markets to
Asked in WBCS Main Paper 5 2022 · Topic: Foreign Exchange Market and Exchange Rate Determination (Role of Reserve Bank of India (RBI) in Foreign Exchange Market Intervention)
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Answer: A. smooth out short-run fluctuations in exchange rates
Read the notes: Foreign Exchange Market and Exchange Rate Determination →
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