 "RBI turns net sellers in forex market")
The Reserve Bank of India (RBI) turned net sellers of foreign currency in August, for the first time in the past one year, in a bid to arrest volatility in the rupee that began after China devalued the yuan.
According to the latest data, the central bank turned net sellers of foreign currency to the tune of $1,559 million compared with net buying of $169 million in the previous month. The last time RBI had turned net sellers was in August 2014 for $511 million.
“In the past two weeks or so, despite the appreciation of the rupee, we had not heard of RBI buying dollars to boost foreign exchange reserves. RBI had intervened a lot in the currency market in August when the rupee was weakening due to yuan devaluation,” said Sandeep Gonsalves, forex consultant and dealer at Mecklai & Mecklai.
The rupee had weakened by 3.65 per cent in August to end at 66.48 against the dollar on August 31. This was despite RBI’s intervention.
It is believed RBI would again turn net buyers. The central bank had said it would build up reserves to stem volatility in the event of US interest rate hike, which might lead to heavy selling pressure in emerging markets.
“Now that the volatility in the currency market has stabilised, I do not think the course of action (of turning net sellers) will be sustained. For the time being, the rupee may trade in the range of 64.50 to 65 per dollar,” said N S Venkatesh, executive director and head of treasury at IDBI Bank.
On Monday, the rupee ended at 64.75 compared to the previous close of 64.74 per dollar.
