This refers to “Watch out for currency manipulators” ( Business Line, July 12). Dr Kaushik Basu’s contentions are that deep pockets, moderate intelligence and moral ambivalence are enough to rake in profits by deliberately making exchange rates fluctuate. Hedge funds and speculators may be causing exaggerated currency movements. Dr Basu is also correct in saying that most of the central banks will not admit the role of the manipulators and defend that market fundamentals were the reason for exchange rates fluctuations. Knowing the weakness of the rupee market, hedge funds and speculators try to position themselves in long or short dollar/rupee, thereby causing huge financial loss to exporters and importers.

Such losses are more in case of the small and medium enterprise sector. They were badly hit by the recent depreciation of the rupee since July 2011 by 19 per cent and again appreciation of 10 per cent by February 2012, followed by a further depreciation to 57.32 by June 12.

It is hence unfortunate that the December RBI circular prevents exporters/importers re-hedge the hedges, and banks have been asked not pass on the profits on cancelled contracts. Also, these companies have to take cash rate on such cancelled contracts.

It is pity that SMEs are hit badly by such directives, whereas hedge funds, speculators, big corporates and banks are making huge, unjustified profits. It is time the RBI acts against the manipulators; else, the SMEs, which contribute more than 75 per cent of global trade, will have to close shop.

Venkatesh S. Bijoor