The Hindu Business Line : Forex reserves rise by $671 m

AFTER a drop of over $500 million in the previous week, the forex reserves of the country moved northwards by $671 million to touch $120.078 billion, up from $119.407 billion for the week ended July 2.

According to experts, the reserves, which had shown dips and rises in recent weeks, surged in the latest week on the back of moderate FII inflows, revaluation of the basket of currencies and rise in gold prices.

The accretion in the reserves is primarily on account of foreign currency assets, which increased by $589 million to $114.718 billion. The gold position of the central bank increased by $83 million to $4.057 billion in the week, according to the RBI's latest statistics.

"The reserves accretion could be primarily on account of some FII inflows and revaluation of the foreign currency assets, as the euro had strengthened against the dollar in the same period," said Mr Ashish Parthasarthy, Head of Trading, HDFC Bank.

For the week ended July 2, the greenback had weakened against major international currencies.

While the euro had strengthened by 1.5 per cent against the dollar, the pound and the yen had also moved up. The week witnessed the much-awaited Fed rate hike to the tune of 25 basis points.

Liquidity position in the system continues to be comfortable although the figure has declined in recent months, said dealers.

About Rs 67,000 crore is still parked in repos by banks with the RBI during the week ended July 2.

"The forex reserves have been yo-yoing over the past few weeks. These fluctuations do not augur of a sustainable trend," said a senior official of a private bank.

Domestic currency was on a topsy-turvy ride during the week.

Rupee had depreciated all the way to 46.10 against the greenback before it recovered to end the week at 45.89.