The Hindu Business Line : Forex kitty swells $685 m due to dollar mop-up

AIDED in large part by consistent trade flows, the country's forex kitty grew stronger by $685 million to touch $108.360 billion for the week ended, February 27, 2004, as against the total reserves of $107.506 billion, the previous week, as per the latest RBI statistics.

Last week, the reserves grew by a mere $189 million. The lower accretion to the reserves then was attributed to the Government's prepayment of the 123.11 billion yen (Rs 5,294.84 crore) ADB loan carried out on February 16, along with a revaluation of RBI's basket of currencies in the wake of the sharp depreciation in the euro and the pound, according to forex dealers.

However, the latest surge in reserves is mainly due to the RBI's absorption of excess dollar liquidity flowing into the system, and some of the increase can also be ascribed to a revaluation in the apex bank's basket of non-US Dollar currencies, according to currency analysts. During this period, foreign currency assets also rose by $685 million to touch $104.069 billion.

Amid significant dollar inflows, the rupee closed steady at 45.2975 on Friday (March 5), after opening the week at 45.2325/2375 on Monday. The domestic currency touched an intra-day low of 45.34 during the week, reacting to state-run banks mopping up greenbacks at the central bank's behest, dealers said. "During the forthcoming week, we can expect the rupee to stay in the range between 45.20-45.30, unless there are any major triggers. It looks like the dollar inflows will continue for sometime and the RBI will not allow the rupee to appreciate sharply," said a dealer with a private sector bank.

Meanwhile, according to the weekly statistical supplement of the RBI, Gold reserves remained steady at $4.289 million while special drawing rights increased by $2 million to touch $10 million.