The Hindu Business Line : Currency revaluation adds $700m to forex reserves

A REVALUATION in the Reserve Bank of India's basket of currencies, contributed to a $700-million accretion to the country's foreign exchange reserves, which touched $ 88.556 billion for the week ended September 19 as compared to $ 87.856 billion in the previous week.

Foreign currency assets grew by $700 million to touch $84.832 billion, according to the latest RBI statistics.

Analysts contend, next week's figures might also register a strong growth in reserves on account of the bull run in the equity markets.

"Reserves will continue to grow steadily as long as FII inflows continue and as long as RBI does not want rapid rupee appreciation. The weakness in the dollar is also a factor which aids rupee appreciation. There might be a reversal in the current trend if the dollar starts to gain strength'', according to Mr U. Venkatraman, Head-Forex and Money markets, IDBI Bank.

Domestic forex and debt markets have been bracing themselves for the RIB redemptions, which will take place next week. Although repeated statements from RBI have assuaged any major apprehensions there might have been, there is still an undertone of tension in the market that may be quelled only post-redemptions, according to dealers.

"RIB redemptions might have little or no impact in the reserves. At best we might see some slowing down in the growth of reserves, in case there is a liquidity crunch in the market and RBI decides to intervene in the market in a bid to supply greenbacks'', said an analyst.

On Friday, the rupee closed six paise weaker against the dollar at 45.8550/8650, due to a sizeable amount of the usual month-end corporate demand for the greenback.

However, forex dealers maintain, that the outlook for the domestic currency is that it will continue to appreciate in the near term, even post-RIB redemptions.

Meanwhile, according to the weekly statistical supplement of RBI, gold reserves remained steady at $3,720 billion while special drawing rights were at $4 million.

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