The Hindu Business Line : Forex reserves decline by $1.37 billion

Analysts ascribed the decline in reserves to the Central bank's intervention in the domestic forex markets to keep the rupee buoyed at "comfortable" levels, coupled with a possible revaluation in foreign currency assets.

"Some of the latest decline in reserves may be attributed to RBI's intervention in the market to keep the rupee supported at higher levels against the dollar," said a dealer with a leading private sector bank.

Analysts believe that with crude prices hardening internationally and the imported price shock spurring the rise in domestic inflation, the apex bank wants to keep the rupee supported at higher levels to aid oil majors with their imports.

"State-run banks have been have been selling dollars aggressively, whenever oil payment related demand emerges in the market," said a treasury head with a leading private sector bank.

Since the Congress-led alliance formed the Government in May, the country's reserves have fallen by over $2 billion in three months. As on end-May, total reserves were $119.820 billion.

Foreign currency assets as on the week ended August 27, dipped by $1.36 million to $112.101 billion, as per RBI statistics.

Foreign currency assets in dollar terms include the effect of appreciation and depreciation of non-US currencies such as euro, sterling and yen held in reserves, according to the weekly statistical supplement of the RBI.

There has also been a $10-million dip in the country's reserve position with the IMF, which is now down at $1.297 billion.

Meanwhile, after touching lows of 46.48/51 in early August, following a demand supply mismatch, the domestic currency has been trading in a narrow band of 46.31 to 46.34/35 over the past few days.

On Friday, even as the annual wholesale price index-based inflation rate shot up to 8.17 per cent as on the week ended August 21, the rupee calmly settled at 46.2950/30 riding the crest of the dollar's weakness overseas.