The interaction between exchange rates

The interaction between exchange rates

Tues The interaction between exchange rates, Treasury securities and money markets
The far-reaching financial sector reforms have also facilitated the movement of India's open economy framework in which the interaction between forex, Government securities and money market has become very important. The opening of the economy led to gains in terms of inflow of foreign investments, which contributed to growth and employment. However, these benefits also poses new challenges for managing the macroeconomy amidst large inflows of capital and variable. This has implications for monetary management. We addressed this challenge with appropriate monetary-fiscal coordination. Suitable changes were made in the MSS and the LAF scheme was introduced to address more permanent part of the liquidity overhang.
Given the growing integration of markets across borders, it is imperative that the domino effect is minimized by refining and upgrading the financial infrastructure in all its vital components, such as accounting standards, including income recognition and provision of norms, standards and disclosure insolvency laws . This upgradation is to be achieved in accordance with international best practices. In this regard, the Reserve Bank has strengthened the consultative process on all major policy steps in a transparent manner by involving market participants and other experts.