Business
Dollar depreciation, RBI intervention leads to slower forex growth
Mumbai, May 16
Depreciation in dollar value
and intervention by the country's apex bank to arrest the slide in rupee
value led to a slower growth in India's foreign exchange reserves in
the week just ended.
According to the data furnished by the
Reserve Bank of India (RBI) in its weekly statistical supplement,
India's total foreign exchange reserves grew by $262.4 million to touch a
new record high of $352.13 billion for the week ended May 8, 2015.
For
the week ended May 1, the reserves had rocketed by $7.26 billion and
touched a new record high of $351.86 billion. The week before that the
reserves had reached $344.6 billion, when it grew by $1.4 billion.
Foreign
exchange reserves have increased by close to $25 billion since January
as overseas investors buoyed by the hope of economic revival poured in
dollars in the local debt and equities market.
"Though the
reserves have grown and touched a new high, the rate of increase has
slowed due to a combination of factors like depreciation in the dollar
value and the intervention by the Reserve Bank of India (RBI) to stop
the fall in the rupee value," Anindya Banerjee, senior manager for
currency derivatives with Kotak Securities told IANS.
Since the
last two weeks RBI has been interviening in the forward trading market
by selling dollar to arrest the fall in the rupee value. The rupee value
was impacted by the significant pull-back of foreign funds due to the
minimum alternate tax (MAT) issue.
Some estimates point-out that
the RBI may have sold nearly $5-6 billion in the forward trading market
to arrest the slide in the rupee value which currently stood at Rs.63.43
per dollar.
According to Banerjee, the other reasons for the
slowing growth of reserves was the fact that exports to the commodity
driven economies were negatively impacted.
"Exports to economies
which are dependent on the sale of raw commodities or crude oil have
been impacted by the low prices of their exports. This has led to a
slow-down in our exports to these markets," Banerjee said.
The
RBI continues to build-up the reserves to counter any future financial
shocks and further slide in rupee value like the one which was witnessed
in June 2013.
"Apart from dealing with any future financial
shocks like the one which was earlier triggered by the US Fed's
announcement of tapering, the healthy state of reserves has acted as a
support to the Indian rupee's value," Banerjee added.
The RBI is cautious about the US Fed's stand that the rate hike might take place in the later part of the year.
With
higher interest rates in the US, the foreign portfolio investors (FPIs)
are expected to be led away from the emerging markets such as India.
The
US Fed had earlier dropped an assurance to be "patient" in raising
interest rates and signalled the hike could come by mid to late this
year.
Meanwhile, the foreign currency assets (FCAs) which forms
the largest component of the forex reserves grew by $262.7 billion and
stood at $327.41 billion in the week under review.
The country's
gold reserves remained stagnant at $19.33 billion. The reserves had
augmented by $297.7 million during the week ended May 1.
However, the special drawing rights (SDRs) were marginally down by $0.2 million to $4.06 billion.
The country's reserve position with the International Monetary Fund (IMF) slipped by 0.1 million.