The role of exchange rate and monetary policies has undergone a qualitative change since 1993, underscoring the need for fresh academic enquiries on these issues. This study, part of the larger project at ICRIER on Capital Account Convertibility and Macroeconomic Management, is an attempt to address this gap. It examines the exchange rate management strategy of the Reserve Bank of India after the floating of the rupee in 1993. A policy reaction function is modelled to test for central bank response to contemporary exchange rate movements and its deviation from purchasing power parity. The impact of exchange rate changes upon foreign exchange reserves is thereafter traced within a vector autoregression framework.