RBI’s attempts to stabilise rupee depletes Forex by $1.40 bn: Experts

Mumbai, Dec 26 (IANS) Efforts by India’s central bank to arrest the depreciation in rupee value depleted the country’s foreign exchange reserves (Forex) by $1.40 billion in the week ended December 18.

According to the Reserve Bank of India’s (RBI) weekly statistical supplement, the Forex reserves stood at $351.10 billion for the week under review.

Market observers cited the central bank’s attempts to arrest the fall in the rupee’s value, as the main reason for the depletion in Forex reserves.

“The massive depletion in the foreign reserves can be attributed to the US dollar selling by the RBI to stabilise the rupee value,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“The rupee value had been dented during that week, on account of the US Fed’s FOMC (Federal Open Market Committee) meet which decided to raise key interest rates.”

For the previous week ended December 11, the country’s foreign reserves had risen by $407.9 million at $352.50 billion.

The rupee value was dented during the period preceding to the FOMC meet, as foreign funds went on a selling frenzy in the domestic equity and debt markets.

On a weekly basis, RBI’s attempts paid-off as the rupee strengthened by 49 paise at 66.40 (December 18) to a US dollar from its previous close of 66.89 (66.8850) to a greenback (December 11).

The data with stock exchanges showed that the FPIs (Foreign Portfolio Investors) bought stocks worth only Rs.19.4 crore in the week ended December 18.

Nevertheless, the FPIs had taken out Rs.23,352 crore during the period August-September. In November alone, the foreign investors off-loaded stocks worth around Rs.9,000 crore.

The foreign currency assets (FCAs) which constitutes the largest component of India’s Forex reserves dwindled by $1.36 billion to $328.26 billion in the week under review.

Apart from the US dollar, FCAs consists of nearly 20-25 percent of other major global currencies, securities and bonds.

The individual movements of these currencies against the US dollar impacts the overall foreign reserves’ value.

Notwithstanding the fall in overall Forex kitty, the country’s gold reserves remained stagnant at $17.54 billion.

Gold reserves had plunged by $1.14 billion at $17.54 billion during the week ended December 4, as international prices crashed to a six-year low.

However, the special drawing rights (SDRs) were lower by $24.3 million at $3.99 billion.

Similarly, the country’s reserve position with the International Monetary Fund (IMF) slipped. It fell by $7.8 million to $1.29 billion.

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