approaches INR 29.40, the central bank intervenes by selling rupees and buying dollars. If it hovers
around a limit point for too long, causing frequent central bank intervention, a new par value closer to
this point is established. Suppose the dollar was hovering around 30.60. The government might then
establish the new par value at 30.60 with new limit points at INR 31.21 and INR 19.99.
Pegged Exchange Rates within Horizontal Bands
Under this arrangement, the value of the currency is maintained within certain margins of fluctuation
of at least ±1 per cent around a fixed central rate, or the margin between the ...
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