The Hindu Business Line : Forex reserves up $2.7 b

THE country's foreign exchange reserves moved up by $2.699 billion during the week ended February 25, taking the total reserves to an all-time high of $135.658 billion from $132.959 billion in the previous week, as per the latest RBI statistics.

For the fortnight ended February 25, the foreign exchange reserves have jumped up by $5.66 billion.

As per the RBI's Weekly Statistical Supplement, a surge in foreign currency assets drove foreign exchange reserves to a record high. Foreign currency assets increased by $2.692 billion to touch $129.844 billion for the week under review.

Mr R.V.S. Sridhar, Vice-President, Treasury, UTI Bank, said, "There are two reasons for the huge forex reserves. One is continuing FII inflows into the stock markets. The second is the depreciation of the dollar against other currencies. The dollar depreciated by close to 1 per cent during that week."

Mr Ajay Mahajan, Group President, Financial Markets and Private Banking, Yes Bank, said, "FII inflow has been very robust in February. In fact, it has been the highest for the whole of the fiscal year." Total FII inflows for the week ended February 25 were $290.5 million.

According to Mr Mahajan, another reason was the aggressive intervention by RBI in mopping up dollars. He said, "The RBI has been mopping up dollars off the market to reduce the base of appreciation of the rupee."

Both the gold reserves and the Special Drawing Rights remained unchanged at $4.39 billion and $5 million respectively. India's reserve tranche position at the IMF increased by $7 million to $1.419 billion.

On March 4, the rupee closed at Rs 43.74/75 per dollar. This was lower than the close on February 28, when it was 43.68 to the dollar. Dealers said that the RBI had tried to reign in the rupee from appreciating against the dollar.

Regarding the outlook for the rupee, both dealers felt that the rupee will appreciate against the dollar. Mr Mahajan said, "My view is that the RBI should at least slow the pace of intervention."

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