India's central bank has revived its 2013 playbook to defend the 100-rupees-to-the-dollar level, first pressing banks to raise $133 billion from the diaspora in under three months, then raising lenders' hedging costs and ordering oil importers to buy dollars directly from the RBI; the rupee has since strengthened to around 95 to the dollar. The columnist warns these fixes may be short-lived given Brent above $100 a barrel, inflation at a two-year high and surging US bond yields, and notes that reserves have fallen by $50 billion since early September against a negative dollar forward book of $200 billion. He argues the real fix is credibility: the RBI has been too accommodating to fiscal needs and slow on inflation, having cut borrowing costs by 125 basis points under Governor Sanjay Malhotra before a first 25 basis-point hike this month. Rather than a sharp 2013-style rate hike or more administrative controls, he suggests selling bonds to lift the whole yield curve and restore India's yield advantage over US Treasuries, whose 10-year spread has narrowed to about 200 basis points from 600 in 2013.
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