In a food processor or blender grind coconut, onion, ginger, green chile, yogurt, lemon juice, and salt with as little water as needed for a moderately thick (not watery) consistency. Set aside.
In a covered medium frying pan, heat the mustard seeds, dried red peppers, and curry leaves in oil over medium high heat until the seeds begin to pop. Uncover, add ground coconut mixture, and stir for 10 seconds. Remove from heat and transfer to serving bowl.
Serve at room temperature as dip for snacks.
Recipe courtesy of Maya Kaimal MacMillan, Curried Favors (c) 1996 Maya Kaimal MacMillan and Abbeville Press, Courtesy Abbeville Press, New York