Rupee Rise Pares Reserve Bank Forex Reserves By Rs 151 Crore
Foreign exchange reserves of the Reserve Bank of India saw an erosion of Rs 151 crore during the week ending July 11 despite an accretion of $43 million to the foreign exchange assets, owing to rupee appreciation.
The hardening of the Indian currency against the dollar by around ten paise during the period June 26 and July 4 reduced the rupee value of foreign currency assets of the RBI.
Foreign currency assets increased by $43 million to $25.452 billion on July 11 from $ 25.409 billion on June 26.
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However, the rupee value of the assets during the same period decreased to Rs 90,741 crore from Rs 90,892 crore a reduction of Rs 151 crore. Thereby leading to a erosion in the rupee value of foreign exchange reserves to Rs 1,04,807 crore from Rs 1,04,958 crore during the same period.
The spot rupee which ruled in the range of Rs 35.83 levels on June 26 hardened to around Rs 35.73 levels on July 11.
The RBI aggressively bought over $ 2 billion worth of greenbacks by intervening in the local forex market during the period April - May 1997.
However, with the surge in dollar continuing the apex bank has been a little slow in its dollar sterilisation exercise.
The RBI seems to have slowed down its dollar mop exercise as indications are that its intervention has crossed $ 3 billion mark. Hence, the RBI enters the market only if its provoked, that is only in cases of extreme volatility, said a treasury head with a foreign bank.
This is as the RBI cannot perpetually go on buying dollars as this operations results in injecting rupee into the banking system which in turn means expansion of broad money supply (M3).
However, the banking system is awash with dollar and very less corporate demand consequently, the rupee is expected to harden with every trading session.
Forex dealers say the rupee against the dollar is seen heading towards Rs 35.50 levels, correspondingly, the foreign exchange reserves in rupee value is expected to undergo further erosion in value.