Financial Daily from THE HINDU group of publications
Sunday, Dec 12, 2004
Money & Banking - Forex
Forex reserves vault by $3.79 b, touch $130.7 b
Mumbai , Dec. 11
THE country's forex reserves soared by $3.794 billion for the week ended December 3, 2004, the highest accretion in a week seen in 2004, as per the latest RBI statistics.
According to analysts, revaluation gains, notable foreign investment inflows and intervention by the central bank in the domestic forex market aided the incredible surge in reserves to $130.717 billion, as against $126.923 billion in the previous week.
An accretion of over $3 billion in forex reserves was last seen during the week ended April 9, 2004 when the reserves had swelled by $3.37 billion to touch nearly $116 billion. At the beginning of this year, forex reserves were at $102.103 billion, as on week ended January 2. In this year alone, additions to reserves have been to the tune of $28.6 billion.
Since the beginning of the calendar year 2004, the reserves have witnessed an addition of over 28 per cent.
"Sharp appreciation of euro, pound sterling and other major currencies against the dollar, leading to revaluation gains in the RBI's basket of currencies, contributed to the significant rise in the reserves," said a treasury official at a public sector bank.
Foreign currency assets soared by $3.553 billion to $124.761 billion during the week, as per the latest weekly statistical supplement of RBI.
Foreign currency assets expressed in dollar terms include the effect of appreciation and depreciation of non-US currencies (such as euro, sterling and yen).
During the week huge FII inflows were seen in the domestic equity and debt market, aggregating to $1.3434 billion, as per data released by the Securities and Exchange Board of India. Reflecting this surge in foreign inflows, the Sensex and Nifty had staged their `highest ever close' during the week.
Propelled by massive inflows the Indian rupee had also appreciated to rise to 44.05 against the dollar on December 2.
Overseas investors have made `record high' investments worth $7.76 billion in the Indian markets so far in 2004.
This growing interest in the Indian markets is likely to continue, but whether the sharp surge of this week will be replicated is yet to be seen, said the chief dealer of a large public sector bank.
Intervention by the central bank in the domestic forex market to buy dollars to stem the rupee's appreciation and in lieu of the sell-buy swaps conducted earlier was also a reason for this rise in reserves, said a banker.
Gold reserves held by the central bank grew by $189 million to $4.540 billion during the week, as also the Reserve Tranche Position in the International Monetary Fund (IMF) was augmented by $52 million to touch $1.411 billion, according to RBI.
Signifying improved liquidity conditions, during the week ended December 3, amounts injected by RBI in the monetary system were in the range of Rs 4,090 crore to Rs 18,225 crore.
Meanwhile, in the past week, the rupee breached the psychological 44-mark, to stage an eight month high of 43.6350/6450 per dollar. It ended the week slightly bearish at 44.79/80 on December 10. In the domestic bond market ample liquidity conditions, easing concerns on inflation and FII interest led to slight recovery in prices.
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