Unlike monetary policy, which is conducted under the explicit mandate of inflation targeting, foreign exchange management is left to the discretion of the Reserve Bank of India (RBI). For many years now, RBI has maintained that it does not target any value of the Rupee, and only steps in at times to control some unstated measure of currency volatility. However, the sheer magnitude and nature of RBI intervention leaves it as a substantial determinant of currency market rates, irrespective of its stated policy or intent. And the central bank’s role in the currency market has been manifesting in a major way particularly over the past few months. The core of RBI’s intervention policy through FY21 was excellent. It acted as a volatility heat sink amidst massive foreign exchange inflows. It prevented excessive rupee overvaluation that could have impeded India’s domestic output, employment, and the prospects of the Atmanirbhar Bharat tilt. However, aspects of the impossible trinity—the inte