The Hindu Business Line : Forex reserves fall by $599 m

Mumbai, Dec 21 After steadily increasing for the past couple of months and surging by an all-time high of $11.871 billion during the week ended September 28, the country’s forex reserves fell by $599 million to $272.954 billion for the week ended December 14, 2007.

The reserves increased by $33 million to $273.553 billion for the week ended December 7.

Revaluation of assets

Foreign exchange dealers said that the fall in reserves is mainly because of the revaluation of currency assets, particularly the euro and pound. “Euro and pound have fallen a bit and this could have brought down the reserves to some extent,” said Mr K. Harihar, Executive Vice-President, Head-Treasury and Financial Institutions, Development Credit Bank. The euro has fallen from 1.48 to 1.43, said dealers.

The foreign currency assets fell by $596 million to $264.164 million, according to the Weekly Statistical Supplement from the Reserve Bank of India. Foreign currency assets, as expressed in dollars, include the effect of appreciation or depreciation in non-US currencies (euro, sterling and yen) held in reserves.

Dollar buying

The increase in reserves during the past few months was mainly because of dollar buying (dollar buying infuses rupee funds into the system) by the RBI in order to cap the appreciation of rupee. Dealers said that the rupee was largely rangebound during the week under consideration and there was not much of dollar buying by the RBI and that could have had an impact on the reserves. Rupee was broadly trading in the range of 39.34-39.40 during the week under consideration.

The country’s reserve position in gold and SDRs remained unchanged at $8.357 billion and $3 million respectively, while that in IMF went down by $3 million at $430 million.

Bank Credit

Bank credit increased by Rs 16,507 crore at Rs 20,91,400 crore for the fortnight ended December 7. A major part of this increase came from the non-food credit which went up by Rs 14,995 crore at Rs 20,52,191 crore. The food credit increased by Rs 1,512 crore at Rs 39,209 crore.

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