How to Make It
In a small saucepan, combine the dried red chile with the water and bring to a boil. Remove from the heat and let stand for 10 minutes. Drain the chile, reserving the liquid. In a blender, combine the red chile with the coconut, shallot, yogurt, serrano chile, ginger, lemon juice, salt and enough of the reserved soaking liquid to make the mixture thick but pourable.
In a large skillet, heat the oil. Add the mustard seeds and curry leaves, cover and cook over moderately high heat until the mustard seeds begin to pop. Stir in the coconut mixture and remove from the heat. Transfer to a serving bowl and serve at room temperature.