FII inflows buoy accretion

Our Bureau

Mumbai, March 17

The country's foreign exchange reserves increased by $773 million to touch $143.921 billion in the week ending March 10, due to dollar buying by the central bank.

This is the seventh consecutive week that there has been an accretion to the country's forex reserves.

In the earlier week, the reserves had increased by $1.558 billion to $143.148 billion.

According to the RBI's weekly statistical supplement, foreign currency assets increased by $766 billion to touch $137.419 billion during the week. Foreign currency assets expressed in dollar terms include the effect of appreciation or depreciation of non-US currencies such as euro, sterling and yen.

According to a dealer with a private bank, RBI was buying dollars in the market to replenish the currency reserves. The euro dipped during the week under consideration to the $1.19 level, hence the revaluation effect can be discounted, said the dealer.

For the week in question, the total FII inflows into the domestic equity market were $369.9 million. Gold and SDRs remained unchanged at $5.747 billion and $3 million respectively.

The country's reserve position in the IMF, however, fell by $3 million to touch $752 million.

Dealers said that the rupee was likely to trade in the range of 44.35-44.50 in the next week. "The RBI could intervene to buy dollars at the 44.40 level and the prevent the rupee from appreciating further. However, the domestic currency could depreciate if the dollar inflows into the domestic stock market ebb," said a dealer at a private bank.

(This article was published in the Business Line print edition dated March 18, 2006)
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