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When an earnest looking Subbarao and his imposing deputy Subir Gokarn tell the world that the RBI will not prop up rupee to rein in inflation, currency traders rub their hands in glee. For them, it’s another opportunity to make money: buy dollar and sell it a few days later, with the central bank promising to stay out of the market. The RBI top brass isn’t exactly saying anything unusual.

It’s a line that central banks and monetary authorities of all IMF member-countries take, to make the simple point that they don’t manage currencies which function as full floats. But when uncertainties are in the nature of ’unknown unknowns’, sentiments swing with new and rapidly changing stories, and jumpy traders fish for every little window to recover losses, staid statements can be electrifying and communications can backfire.

May be, the RBI should have kept the market guessing about its intentions, even if it had no plans to dump dollars. Views like these are a part of a chatter that Mint Street has goofed up on the dollar. That it let the rupee slip too low too fast. That it should have sold dollar more aggressively to unnerve speculators . That it miscalculated the demand-supply mismatch. That it should have known better than others that opening a few doors - like allowing corporates to take more dollar loans and foreign portfolio managers to invest more in local bonds - won’t cause a dollar deluge. After all, global investors don’t always rush in just because rules have been loosened.

RBI backers have a ready rebuttal: when the dollar is gaining, trying to pull it down is a mindless and futile exercise; can you go on selling dollar when euro is on the brink; why dip into forex reserves, etc. While these arguments have a merit, a more assertive RBI could have turned the rupee’s decline less dramatic for the market and less damaging for business.

The US dollar index gained a little less than 4% since August 8 - the first trading day post US debt downgrade which marked the beginning of a new phase of volatility. While the euro fell 3% between August 8 and November 11, the rupee fell 10% against dollar. There are doubts whether the rupee’s depreciation, one of the highest, can be largely attributed to the dollar’s gain globally. But while most central banks have either acted or signalled that they would act to ensure "orderly movement" of their respective currencies and protect the real economy, the RBI has often been loud and explicit that it will not intervene.

Amid raging inflation and high crude price that drove oilcos to raise petrol prices, one wonders whether it made sense. The bulk demand for dollar in the past three months came from bunched up oil payment to Iran, defence payouts, regular oil purchase and FII outflow. Inflow dipped as global risk aversion grew. RBI officials may have felt that the outgo on account of Iran and inflow from a large high profile FDI deal would offset each other. But simple arithmetic went haywire as the dollar surged with more bad news from Euroland.

The sharp slide in the rupee, however, could have been tempered if the RBI had supplied dollar to the market and kept bulk demand from oil companies and PSUs off the market. It could have not only improved inflation and corporate earnings, but also upheld RBI’s professed policy of maintaining "orderly movement in the currency market" .

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NEW YORK: Wall Street edged lower on Monday as Italy and Greece rushed to form technocrat-led governments in a bid to stave of the euro zone’s debt crisis, and as data showed the region is facing a looming recession.

The euro fell against the dollar as initial optimism about prospects of crisis-fighting reforms under new governments in Italy and Greece gave way to caution over the huge debt problems still plaguing the single currency zone.

"Last week the markets chose to treat the glass as half full in interpreting the retirement of the regimes in Greece and Italy as positive, but it did nothing to cure the underlying issues," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

Industrial production in the euro zone fell in September, the most since early 2009, supporting expectations of a sharp contraction of industry and a probable economic recession. Output at factories in the 17-nation bloc fell 2.0 percent for the month.

"It is confirming directionally what investors hold as their belief, which is that Europe is either in or moving quickly toward what is likely recession," Luschini said.

Stocks have traded choppily and in tandem with the euro recently in a sign U.S. investors are taking cues from the euro zone’s mushrooming debt crisis as bouts of risk aversion are followed by periods of relative optimism.

The Dow Jones industrial average fell 19.60 points, or 0.16 percent, at 12,134.08. The Standard & Poor’s 500 Index lost 5.90 points, or 0.47 percent, at 1,257.95. The Nasdaq Composite Index fell 9.36 points, or 0.35 percent, at 2,669.39.

European shares fell after an auction of up to 3 billion euros ($4.1 billion) of five-year Italian bonds failed to provide relief to investors. The FTSEurofirst fell 0.7 percent.

Helping the Dow, Boeing Co shares rose after the U.S. planemaker announced an order worth at least $18 billion and said the Middle East will need to recruit and train tens of thousands of new pilots to sustain a massive expansion in long-haul fleets. The shares added 2.5 percent to $68.62

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Former chief minister B S Yeddyurappa said on Monday that ’’there is no question of quitting the party as it is a house built by me. I might quit politics, if I face unbearable circumstances.’’

He was speaking at a convention of his followers organised by the taluk BJP unit at Shikaripur in the district. Addressing the gathering, he said “BJP is my house. Let others quit the party, I don’t mind. I will be in active politics till my last breath. I am not scared of any kind of conspiracy.”

He said: “Chief Ministers Jayalalitha and Sheila Dikshit are facing criminal charges. But, they have not resigned from the top post. However, I had to step down from the post due to the direction from the party’s Central leaders. Neither am I eyeing the post of State BJP President nor that of the chief minister. I will tour the entire State as a loyal party worker. I don’t need to take permission from anybody for this.”

‘Not campaigning’
On the Bellary bypoll, he said: “I am not taking part in the bypoll campaign for a special reason. However, the party leaders should not think otherwise. If I am harassed for skipping the campaign, I may quit politics in the near future. But, I will wait and watch the attitude of the party leaders carefully.”

Exuding confidence about BJP’s victory in the bypoll, he said: “Our candidate Gadilingappa will emerge victorious in the bypoll. Unfortunately, people of Bellary haven’t got real freedom yet. I wish they ‘relish’ freedom this time. This byelection won’t have any impact on the State government.”

PWD Minister C M Udasi, Rajya Sabha member Ayanur Manjunath, Lok Sabha member B Y Raghavendra, MLAs H Halappa, Belur Gopalakrishna, K G Kumaraswamy, MLC Bharati Shetty, MPM Chairman Araga Jnanendra, Bhadra Command Area Development Authority Chairman K Shekharappa, State Urdu Academy Chairman Amjad Hussain, District BJP President R K Siddaramanna and others were present.

Thousands of BJP activists from Shimoga and Haveri districts participated in the event.

A divided house
The event made it clear that the BJP is a divided house in the district. State BJP President K S Eshwarappa, who is also the Shimoga City MLA, and his followers did not take part in the event.

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