Headlines
Appreciating dollar, oil, commodities slow forex growth
Mumbai, June 13
Strengthening dollar, crude
oil and commodity prices, coupled with a downfall in foreign investors'
sentiment, has led to a slowdown in the growth of India's foreign
exchange reserves.
According to data furnished by the Reserve
Bank of India (RBI) in its weekly statistical supplement, India's
foreign exchange reserves grew by only $239.4 million and stood at
$352.71 billion in the week ended June 5, 2015.
The reserves
had grown by $917.5 million in the week before to $352.47 billion. For
the week ended May 22, 2015, the foreign exchange reserves had fallen by
$2.31 billion to $351.55 billion after four successive weeks of gains.
The
country's foreign exchange reserves had touched a record high of
$353.87 billion for the week ended May 15 having increased by $1.74
billion over the previous week.
Foreign exchange reserves have
increased by close to $30 billion since January as overseas investors,
buoyed by the hope of economic revival, poured in dollars in the local
debt and equities markets.
"The slowdown in the reserves is due
to the dollar rallying and the rupee falling. Though the reserve bank is
closely monitoring the situation, so that the rupee does not goes into a
free fall, global cues are adding to the volatility," Anindya Banerjee,
senior manager for currency derivatives with Kotak Securities told
IANS.
"The hawkish language used by the Reserve Bank in its
monetary policy review on June 2 and the less-than-expected cut in the
key lending rates also subdued the foreign investors' sentiments,"
Banerjee said.
According to Banerjee, in the last 6 weeks the
FPIs (Foreign Portfolio Investors) have sold stocks worth nearly $3
billion. They had picked-up scrip worth $2.4 billion in April.
Banerjee
also pointed-out that the RBI has been selling dollars to stabilise the
rupee value in the forward trading markets since the last many weeks.
"The
RBI is selling dollars, whenever the rupee crosses the Rs.64 level mark
and buying when it falls below Rs.63. This is a very short range.
However, the RBI seems to be comfortable with the rupee ranging anywhere
between Rs.62-Rs.64 per dollar," Banerjee said.
Some estimates
point-out that the RBI may have sold nearly $10 billion in the forward
trading markets to arrest the slide in the rupee value which currently
stood at Rs.64.10 per dollar.
The analysts elaborated that the
RBI Governor Raghuram Rajan is monitoring the rupee movement closely, so
that it does not shows any downward trend that might affect the
speculators to go into a selling frenzy.
"The Indian financial
markets are more integrated to the world markets than the whole of the
Indian economy. This is why even the slightest signs of instability
anywhere cause the rupee to spike above Rs.64 per dollar," he said.
Recently
the reserves were put under pressure, as the signs of improving global
oil demand is evident. Oil prices were last seen trading at $64.49
compared to the previous close of $62.87.
The RBI is continuing
to build-up its reserves to counter any future financial shocks and
slide in rupee value like the one which was witnessed in 2008 and 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 FPIs are expected to be led away from the emerging markets such as India.
Meanwhile,
the foreign currency assets (FCAs) which forms the largest component of
the forex reserves rose by $192.9 billion and stood at $328.01 billion
in the week under review.
The country's gold reserves which were
stagnant at $19.33 billion, since the week ended May 1 grew by $4.5
billion and stood at $19.34 billion.
The special drawing rights
(SDRs) were up by $31.7 million to $4.04 billion. The country's reserve
position with the International Monetary Fund (IMF) grew by $10.3
million to $1.31 billion.