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India’s Forex reserves rise to $353 billion: RBI

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Mumbai: A strengthening rupee, buoyant equity markets coupled with a fall in dollar value boosted India’s Forex reserves by $2.26 billion, experts said on Saturday.

Overall, the Forex reserves stood at $353.06 billion for the week ended October 9.

“The increase in Forex reserves can be attributed to an appreciation in rupee value and the weakening of US dollar against the major global currencies like Euro, Pound and Yen,” Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

“It is perceived that the appreciation in rupee value allowed the Reserve Bank of India (RBI) to buy more dollars and keep rupee in a comfortable range,” Banerjee said.

The rupee had closed at 64.74 to a US dollar during the week ended October 9. The rupee gained 77 paise on a weekly basis from its previous close at 65.51 to a US dollar in the week ended October 2.

Previously, a rise in the value of gold reserves had added $827.4 million to India’s Forex kitty which swelled to $350.80 billion for the week ended October 2. The reserves had declined by $2.04 billion to $349.97 billion in the week ended September 25.

Furthermore, the data furnished by the RBI in its weekly statistical supplement showed that the foreign currency assets (FCAs) had gained by $2.22 billion to $329.51 billion in the week under review.

The FCA constitutes the largest component of India’s Forex reserves. It consists of US dollars, major non-dollar currencies, securities and bonds bought abroad.

“The dollar in the week under review, had depreciated by close to 1 percent against major global currencies. This added around $1 billion to the FCA,” Banerjee said.

The Indian reserves consist of nearly 20-25 percent of non-dollar currencies. The individual movements of these currencies against the dollar impacts the overall reserve value.

Besides, currency movements, increased inflows into the equity markets supported the Forex’s upwards trajectory.

During the week ended October 9, the barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), rose 858.56 points or 3.17 percent to 27,079.51 points.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) too made gains during the weekly trade ended October 9. It rose 238.8 points or three percent to 8,189.70 points.

“Rising equity markets, increased inflow of foreign funds and appreciating rupee have had a positive impact on the reserves,” Hiren Sharma, senior vice president, currency advisory at Anand Rathi Financial Services, told IANS.

“RBI may have entered into the markets to stabilise the rupee. RBI is seen not to be comfortable with the rupee appreciation.”

During the week under review, the country’s gold reserves remained stagnant at $18.15 billion. The country’s gold reserves had risen by $116.5 million to $18.15 billion during the week ended October 2.

The special drawing rights (SDRs) in the week under review were higher by $30.4 million at $4.07 billion.

The country’s reserve position with the International Monetary Fund (IMF) edged up by $10.5 million to $1.32 billion.

(IANS)

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Indian Rupee: One Of The Worst Performing Currencies

The rupee is still overvalued, according to the 36-country Real Effective Exchange Rate calculation after adjusting for inflation

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Indian Rupee: One Of The Worst Performing Currencies. flickr

The Indian rupee’s plunge to an all-time low of 69.09 against the US dollar, compared to the previous low of Rs 68.865 in November 2016 reflects the ill-effects of US President Donald Trump’s disastrous economic policies on the world at large. Indeed, American protectionism through higher import duties coupled with the consequences of renewed US sanctions against Iran is indeed playing havoc with economies across the world. That the rupee has fallen by more than eight per cent over the last one year is not good news for India, though, there is a silver lining in terms of the possibility of higher exports. The hard reality is that the rupee is one of the worst performing currencies in the world and the consequences of American policies could make things worse.

Not only have foreign institutional investors been pulling out funds from the Indian market, having withdrawn a whopping Rs 46,197 crore in three years, the spectre of higher crude prices due to the sanctions against Iran could disturb the applecart further considering that India depends heavily on crude imports to meet its oil needs. If there is any consolation at all for the rupee’s plunge, it is that most emerging market currencies are crashing.

currency
Indian currency notes. Pixabay

Also read: Crores of rupees being spent on defunct websites of Municipal Corporation of Delhi

The Reserve Bank’s prop by selling US$400 to 500 million in one-month futures contracts has saved the day for India. Almost an equal amount has been sold through Mint Street. Mercifully, a weak rupee need not be necessarily bad for the Indian economy. The rupee is still overvalued, according to the 36-country Real Effective Exchange Rate calculation after adjusting for inflation. As of May, the over-valuation was 14.67 per cent. This could give exports a boost which is a silver lining. There is also a Moody’s report which says that India is one of the five countries that are least vulnerable to currency pressures amid strengthening of the US dollar due to low dependence on external capital. But the downside is that as US interest rates go up, investors who borrowed at a cheaper rate would find returns from investing in India not worth the risk. On balance, major economic challenges lie ahead of India meeting with would be no mean task. (IANS)