RBI's Intervention in the foreign exchange market started well in 1990s in the wake of the adoption of themanaged floating exchange rate regime. Although the purpose in general has been to check undesirablevolatility in the exchange rate, RBI states the objectives as follows(1) To influence the trend movements in the exchange rates because they perceive long termequilibrium values to be different from actual values(2) To maintain export competitiveness.(3)To manage volatility in order to axe risk in financial market transactions(4) To protect the currency from speculative attackThe intervention has now turned more significant in view of large inflows on account of foreigninvestment - both FDI and FII The quantum of FDI has suddenly soared up from US $7.722 billion fromFY 2005-06 to US $19.531 billion during FY 2006-07. The investment by FII was too largeThe net investment was as big as US $3.225 billion during FY 2006-07, although the gross investmentwas mich bigger. During the first four months of FY 2007-08, FDI and FIIs net investment wererespectively of the order of US $6.609 billion and US $11.774 billionIt was natural for INR to appreciate in the sequel of huge supply of US dollar in the foreign exchangemarket. INR which was once at a low of 46.88 per US dollar during April 2006, appreciated to 41.19during April 2007 and further to 39.77 during September 2007. Indian imports turned cheaper followingappreciation​