Financial Daily from THE HINDU group of publications
Sunday, May 08, 2005
Financial Daily from THE HINDU group of publications Sunday, May 08, 2005 |
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Money & Banking
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Forex Forex reserves fall $648 m on euro revaluation Our Bureau
Mumbai , May 7 THE country's foreign exchange reserves for the week ended April 29 fell by $648 million due to the revaluation of euro in the central bank's currency basket, after a substantial gain in the earlier week. According to the Weekly Statistical Supplement of Reserve Bank of India, forex reserves stood at $141.898 billion for this period. In the earlier week, forex reserves surged by over $1 billion to touch $142.546 billion. A fall in foreign currency assets and the reserve tranche position in the IMF were cited as reasons for the decline in forex reserves. Foreign currency assets moved down by $645 million to touch $135.950 billion for the week under review. Foreign currency assets expressed in US dollar terms include the effect of appreciation/depreciation of non-US currencies such as the euro, the sterling and the yen. Gold and SDRs remain unchanged at $4.5 billion and $5 million, respectively. The country's reserve tranche position in the IMF also dipped by $3 million to touch $1.443 billion. A treasury head at a private bank said the week in question saw a rise of the euro against the US dollar. The euro rose to $1.30 in the first half of the week and touched a high of $1.31. It inched down to $1.297 by the weekend. The dip in the forex reserves was, thus, caused by a revaluation in the central bank's currency basket, he said. The country saw an FII outflow of $122.6 million. This, according to a dealer, was not significant enough to have had an impact on the forex reserves. Between May 2 and May 6, the rupee was buoyed by the speculation on the yuan revaluation. It rose from 43.57 on Monday to close the week at 43.4350/40. A dealer at a private bank said the Chinese Government would carry out the revaluation of the yuan in small doses, as the entire forex system would be affected if it happened suddenly. The markets are expecting it to happen soon and have positioned themselves accordingly. "While the appreciation of the rupee will result in a fall in import bills, the competitive edge of the country's exports will not be dented,'' he said. Going forward, the rupee is expected to appreciate further on possibilities of a yuan revaluation. The rupee is likely to touch the psychological level of $43.30, dealers said. At this level, there is a possibility of strong dollar selling, they said.
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