India's forex to rise despite RBI support, swap maturity, say economists

India's foreign exchange reserves are expected to have risen in the week through August 8, according to economists calculations based on the Reserve Bank of India's weekly reserve money release.

A $5 billion dollar/rupee swap by the RBI matured that week, with bankers saying the central bank delivered the swap, a move that is a drain on reserves.

Further, the RBI intervened in both the onshore spot and non-deliverable forward markets that week to prevent the rupee from slipping past its all-time low of 87.95 after US President Donald Trump imposed additional tariffs on Indian goods over the country's purchase of Russian oil.

This drain on reserves was balanced out by revaluation effects, economists said.

"The rise in FX reserves was fuelled by a revaluation boost of $9.8 billion, reflecting higher gold prices and a weaker dollar," said Gaura Sen Gupta, economist at IDFC First Bank.

She estimated that India's reserves rose by more than $4 billion during the week.

The official figures will be released on Friday.

When RBI sells dollar in the spot market to support the rupee it directly reduces FX reserves, while NDF interventions influence offshore sentiment without an immediate reserves impact.

The net dollar selling by RBI in that week was $5.6 billion, which includes maturity of $5 billion swap, Sen Gupta said, which she noted implied spot intervention in the week was less and that the RBI would have relied on NDF.