The Hindu Business Line : Forex surge continues; reserves top $ 140 b

SWEPT up by a torrent of dollar inflows and a revaluation in the RBI's currency basket, the country's foreign exchange reserves surged by $2.87 billion in a single week.

India's forex kitty was augmented to an all-time high of $140.429 billion for the week ended March 11 against $137.559 billion in the previous week, as per the latest RBI statistics.

In the last four weeks alone, there has been a total accretion of $10.44 billion to the forex reserves.

The steady spate of foreign institutional investments into Indian equities has largely contributed to the significant rise in reserves over the past four weeks, said analysts.

As per SEBI data, total foreign institutional investments into Indian equities amounted to $730.5 million during the week under review.

Dealers said forex inflows have been robust for the week ended March 11 and most of the month.

The Central bank has been actively mopping up excess dollars from the market through State-run banks.

"There is a view in the market that RBI is trying to pitch the rupee 2 to 3 per cent lower than the actual valuation against the greenback," said a dealer with a private sector bank.

As per the Weekly Statistical Supplement of RBI, foreign currency assets increased by $2.823 billion to reach $134.584 billion, while India's reserve position in the International Monetary Fund increased by $47 million to reach $1.464 billion for the week ended March 11.

Foreign currency assets expressed in US dollar terms include the effects of appreciation or depreciation of non-US currencies such as the euro, sterling and yen held in the reserves.

"The yen and euro strengthened against the dollar last fortnight. This may be getting reflected in a revaluation in RBI's basket of currencies, which, in turn, will also be reflected in terms of reserves' accretion," said a dealer.

In the current financial year, reserves have seen a net addition of $28 billion (from $112 billion as of April 2, 2004 to $140 billion currently).

The first full week in the financial year (April 2-April 9) saw a huge rise in reserves at $3.37 billion.

Aided by the strong flow of dollars, the domestic currency closed stronger against the greenback at 43.65/66 on Friday.

However, on the same day, strong dollar buying by oil companies and other corporates rushing to cover short positions led the domestic currency to dip to an intra-day low of 43.70 to the dollar, its lowest level in two weeks.

Dealers were unable to fix a view on the rupee in the coming weeks due to the volatility in oil prices.

"I see a moderately depreciating rupee carefully calibrated by the RBI," said a dealer.

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