Forex reserves cross $350-billion mark

Rupee gains after five session of loss, recovers from 20-month low

India’s foreign exchange reserves grew $7.26 billion for the week ended May 1, the sharpest rise since September 2007, according to the latest data released by the Reserve Bank of India. Total reserves were at an all-time high of $352 billion for the week ended May 1, 2015.

In the week ended September 28, 2007, foreign exchange reserves had jumped $11.87 billion on a week-on-week basis to $247.76 billion.

For the week ended May 1, the increase was on account of foreign currency assets, which recorded a rise of $6.89 billion on a week-on-week basis to $327.15 billion.

“The rise could be on account of forward buying done earlier. Normally, when forward buying is done, it is month-end buying. Besides that, non-dollar currencies would have strengthened against the dollar. If we are maintaining some part of our reserves in other-than-dollar currencies, that would have appreciated,” said Ashutosh Khajuria, president (treasury), Federal Bank.

During the week, gold reserves rose $297.7 million to $19.34 billion, while special drawing rights rose $57.6 million to $4.06 billion, while India’s reserve position with the International Monetary Fund (IMF) was up $18.7 million to $1.32 billion.

In the past, the Reserve Bank of India (RBI) had been mopping up dollar flows attracted by domestic markets. “RBI has been very advanced compared with other central banks. They have maybe 55 per cent of their reserves in dollars. There was money coming in heavily to India and RBI did not want the rupee to strengthen,” said Jamal Mecklai, CEO of Mecklai Financial Services.

On Friday, the rupee ended strong against the dollar, after five sessions of loss. The Indian currency recovered from a 20-month low touched on Thursday.

“The rupee appreciated against the dollar on Friday as global debt sell-off took a pause and investor appetite for emerging market assets revived. However, data showed that foreign investors remained net sellers of $202.46 million of shares yesterday (Thursday), according to data from National Securities Depository,” said Suresh Nair, director at Admisi Forex. This week, the rupee weakened 0.8 per cent against the greenback.

On Friday, the rupee ended at 63.94 against the dollar, compared with the previous close of 64.24.

“The central bank (RBI) had been sterilising the dollar inflows due to which reserves had gone up. But this week, that trend has taken a 180-degree shift,” said the head of treasury at a large public sector bank.