The Hindu Business Line : Forex reserves decline sharply by $1.53 billion

THE country's foreign exchange reserves fell by over $1.5 billion during the week ended July 23. This is the sharpest weekly fall in reserves registered in the current year.

According to forex analysts, selling of dollars by RBI and revaluation of currencies in the central bank's basket would have depleted the reserves. A similar drop was seen in October 2003 when reserves fell by $1.589 billion following the redemption of the Resurgent India bonds.

Last week, the rupee had weakened substantially, being in a range of 46.09 to 46.34 against the dollar. Towards the close of the week, it had touched a year's low of 46.32/34 against the greenback. The central bank had reportedly sold a large amount of dollars to support the rupee losing further ground against the US currency. During the week, euro and pound sterling fell against the greenback.

Forex reserves plunged by $1.531 billion to $119.575 billion from $121.106 billion in the previous week. The week's decline in reserves was almost entirely in foreign currency assets, which dipped by $1.522 billion to touch $114.215 billion, while the fall in reserve position in the International Monetary Fund (IMF) was to the extent of $9 million. The reserve position in IMF fell to touch $1.301 billion as against $ 1.310 billion last week.

Mr R.V.S. Sridhar, Vice President and Head Forex, UTI Bank said the dip in foreign currency reserves could be attributed to significant exchange rate movement in the week. The US currency gained about 1.3 per cent against other major currencies.

Losing on investments in euro, pound sterling and other currencies possibly led to the decline in the foreign currency assets.

Meanwhile, liquidity position in system remains comfortable with Rs 58,075 crore parked with the RBI in repos on July 23. The amount has marginally increased from previous week when it was about Rs 53,000 crore.