Forex Reserves Jump $600m

The foreign currency assets of the Reserve Bank of India are estimated to have surged by a massive $600 million during the past seven days to touch $20.6 billion yesterday. The assets were estimated at $20.086 billion as on March 7.

The surge witnessed last week is $200 million more than the $400 million mopped up by the RBI in the week after the Union budget. Bankers say the figure is expected to go up further on account of the increased FII inflows as well as the continuous RBI buying in the forex market.

The apex bank is expected to sustain the mopping-up operations in the next week too.

Reserve Bank governor C Rangarajan had indicated recently that the central bank will continue to intervene in the forex market to mop up dollars in order to the stop the rupee from appreciating further. He added that he will continue to help exporters through sustained intervention. But, the extent of the intervention will be limited so that it does not have an adverse impact on the money supply, he had added. Macroeconomic compulsions will also determine the extent of the intervention, according to Rangarajan. Market sources feel exporters with long-term exposure of up to a year are pulling out of the far end of the forwards market as a result of this policy. This is because they expect that the RBI will not allow the rupee to appreciate in the long run.

Yesterday too, the Reserve Bank was active in the forwards market, mopping up about $200 million. Besides, it was buying forward dollar outright for May to October. This had an effect on the forward premia levels for the maturities, said a forex manager at a leading private sector bank.

Forex brokers expect the RBI intervention to continue on the back of enhanced capital receipts by way of investments from FIIs and inflows on account of global depository receipts.

The net FII inflows have touched $98.6 million in the first 11 days of this month. The total investment inflow since the beginning of the current calendar year was $276.9 million, while the VSNL GDR issue is expected to bring in $950 million to $1 billion. The ICICI subordinated debt issue is also expected to bring in another $100 million.

$200m RBI mop-up