Mumbai, Feb 27 (IANS) A strengthening dollar, coupled with the central bank’s attempts to arrest the fall in the rupee’s value plunged the country’s foreign exchange (Forex) reserves during the week ended February 19, experts said on Saturday.
According to the Reserve Bank of India’s (RBI’s) weekly statistical supplement, the overall Forex reserves declined by $1.46 billion to $350.36 billion.
The foreign reserves had risen by $347.2 million to touch $351.83 billion for the week ended February 12.
Currency analysts, cited revaluation impact as the main reason for the depletion in
foreign exchange coffers.
“The country’s foreign exchange reserves were negatively impacted by a strengthening dollar during the week under review,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.
The foreign currency assets (FCA), which is the largest component of India’s Forex reserves, slumped by $1.43 billion to $328.58 billion during the week under review.
Apart from the US dollar, the FCA consists of nearly 20-30 percent of other non-US dollar major global currencies, securities and bonds.
The individual movements of these currencies against the US dollar impacts the overall foreign reserves value.
“The US dollar rallied by more than one percent against major global currencies during the week under review. This receded the foreign exchange reserves,” Banerjee added.
Other currency analysts blamed the central bank’s dollar selling activity to arrest the fall in the rupee’s value for the decline in Forex coffers.
“RBI has been very active. It has been selling US dollars to stem the fall in the rupee’s value,” a currency analyst told IANS from New Delhi.
“It may have even sold more US dollars at the forward and futures market, which are not counted, as part of the official reserves statistics.”
On a weekly basis, the rupee weakened by 23 paise to 68.47 (February 18) against a US dollar from its previous close of 68.23-24 (February 12).
The weakness in India rupee’s value indicated the massive outflow of foreign funds from the equity and debt markets.
National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) sold Rs.3,307.47 crore or $484.42 million in the equity and debt markets from February 15-18.
Data with stock exchanges disclosed that the FPIs divested stocks worth Rs.2,608.87 crore during the week under review.
Notwithstanding the downward trend, the country’s gold reserves remained stagnant at $17.69 billion for the week ended February 19.
However, the special drawing rights (SDRs) were negatively impacted by currency revaluation as they plummeted by $2.57 billion to $1.48 billion.
Similarly, the currency revaluation impacted the country’s reserve position with the IMF. But unlike SDRs, the impact was positive, which swelled the reserve position by $2.54 billion to $2.59 billion.