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| Forex reserves dip by $5 bn | |
| BS Reporter / Mumbai November 22, 2008, 0:12 IST | |
 India’s foreign exchange reserve fell by $5.01 billion to $246.35 billion during the week-ended November 14, 2008 as the Reserve Bank of India (RBI) intervened in the markets to check steep depreciation of the rupee.
In addition, the US dollar has strengthened against most international currencies in recent months.
On November 14, the rupee had closed at 49.01 against the US dollar, 2.83 per cent lower than the closing level of 47.66 on November 7. During the week, foreign institutional investors were net sellers to the tune of $325 million in the equity markets thereby putting pressure on the rupee.
Repated intervention by RBI in the foreign exchange market has meant that India's foreign exchange reserves have dipped by $63.37 billion since the end of March, 2008. The reserves are nearly $29 billion lower than the level at the end of December 2007. Forex reserves fell below the $250 billion mark after more than 13 months. For the week-ended September 28, 2007, India's foreign exchange reserves were at $247.76 billion.
The rupee has depreciated 26.89 per cent against the US dollar during 2008 as foreign institutional investors have been pulling out their investment from India to meet the requirements in their home markets. The rupee closed at 50.02 against the dollar today, compared with 50.15 on Thursday, according to data compiled by Bloomberg.
According to the latest RBI Bulletin, the central bank sold $9.65 billion between April and September 2008 to check the Indian currency from weakening. The data comes with a lag of around two months. FIIs have intensified sell off from the second half of September after the financial turmoil became more pronounced. Since September 26, the country's foreign exchange reserves have dropped by over $45 billion.
The heavy intervention by the central bank in the forex markets is also putting pressure on liquidity as RBI sells dollars in the market and sucks out rupee resources. It is cited as one of the major factors affecting domestic liquidity.
Reflecting the weakening of the Indian currency against , in rupee terms, foreign exchange reserve rose by Rs 10,66,944 crore to Rs 12,18,263 crore during the week-ended November 14, 2008.
According to the latest RBI data released today, India's foreign currency assets declined by $5 billion to $237.52 billion during the week. Gold remained unchanged, while SDRs dipped by $6 million. The reserve position in the International Monetary Fund declined by $3 million to $443 million during the week.
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