The Hindu Business Line : Forex reserves up $89 m as inflows decelerate

FOREX inflows have decelerated for the week ended May 7, 2004. Net accretion during the week was a mere $89 million as against a growth of $611 million in the week ended April 30,2004, as per the latest RBI statistics.

As on the week ended May 7, 2004, total reserves stood at $118.579 billion, as compared to $118.490 billion during end April.

Currency analysts said the slowdown in the reserves accretion could be attributed to a less aggressive posture adopted by the central bank in terms of intervention in the market.

The reserves have been mainly augmented by an $84-million increase in foreign currency assets, which stood at $113.095 billion and a rise of $5 million in the reserve position with IMF, which stood at $1.291 billion.

"RBI has not been buying dollars robustly these past couple of weeks as the inflows themselves seemed to be lower than usual. Over the past few weeks alone, reserves growth had slowed down to around $500-600 billion, where earlier this year we saw surges of over one to three billion in a single week," said a dealer with a private sector bank.

Referring to the meltdown in the equities markets over the past couple of days, propelled by the aggressive pulling out by FIIs, forex analysts expect that the growth in reserves will be negligible or even negative.

With global interest rates threatening to start inching up in the near future, and with the US Fed looking poised to hike interest rates earlier than expected, there are concerns that external investments into the country may decline in the near future.

The domestic currency ended 38 paise weaker at 45.60/63 per dollar, driven down by the shakeout in the equities market on account of domestic political uncertainties.

Forex analysts now contend that `perhaps', the rupee has slipped into a correction mode in its value against the dollar.