The Hindu Business Line : Forex reserves down $430 m

THE country's forex reserves dipped by $430 million to touch $118.892 billion for the week ended August 20, as per the latest weekly statistical supplement of the Reserve Bank of India.

Forex reserves stood at $119.322 billion in the previous week.

Analysts ascribe the decline in reserves to heavy intervention by the central bank in the forex market to sell dollars and partly to a revaluation in the RBI's basket of currencies.

The foreign currency assets position reduced by $439 million to $113.461 billion compared with $113.900 billion in the preceding week. The change in foreign currency assets expressed in US dollar terms includes the effect of appreciation or depreciation of non-US currencies such as euro, sterling and yen held in reserves, according to the central bank's WSS.

The dip in foreign exchange reserves was offset by an increase of $9 million in the reserve position of the central bank in the IMF to $1.307 billion against $1.298 billion in the previous week.

"The reserves are not moving upward as higher oil prices have led to a weakening rupee against the dollar. This has led to substantial intervention by the central bank in forex market in terms of supplying dollars to support the domestic currency," said a Treasury Head with a private sector bank. He added that the fall in reserves was contained to a certain extent by some dollar inflows.

During the week, the rupee strengthened by about 10 paise to close at 46.32/33 against the dollar. According to the Securities and Exchange Board of India data, foreign investments in the week concerned were about $409 million.

The amount parked with the central bank in repos was at about Rs 33,725 crore as on August 19. This amount was in a range of Rs 43,000 crore to Rs 33,000 crore approximately during the week. The 1-day repo reintroduced by the central bank witnessed substantially larger number of bids in the week.