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This exchange occurs in Act I scene 2 of this play, and is a classic example of a Shakespearian pun, or a play on words. Of course, Rosalind is showing her customary intelligence and verbal dexterity by quickly deliberately misinterpreting Touchstone's use of "rank," which he originally meant to refer to status, as refering actually to bad smells. The phrase that Rosalind interrupts Touchstone with actually refers to the letting loose or release of a bad smell. Rosalind is suggesting that Touchstone will break wind if deprived of his rank.
Note the way that this example of a pun suggests the intelligence and quick-thinking of Rosalind and the kind of jovial relationship that she enjoys with Touchstone. They are obviously able to poke fun at each other, which points towards the way that Touchstone will accompany them as their protector in the Forest of Arden.
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