Our Bureau

Mumbai, July 16

THE country's foreign exchange reserves have declined for the third consecutive week on account of currency revaluation.

In the past three weeks, the forex reserves have fallen $2.667 billion.

For the week ended July 8, forex reserves fell $544 million to touch $136.899 billion, according to the Reserve Bank of India's Weekly Statistical Supplement. In the earlier week, the forex reserves had dipped $1.447 billion taking the total to $137.443 billion.

The decline in reserves is mainly due to a fall in the foreign currency assets, which fell $529 million to touch $130.897 billion. Foreign currency assets expressed in dollar terms include the effect of appreciation/depreciation of non-US currencies (such as euro, sterling, yen) held in reserves.

Gold and Special Drawing Rights remained unchanged at $130.897 billion and $4.453 billion respectively. The country's reserve tranche position in the IMF, however, fell $15 million to touch $1.545 billion.

The week under review saw a foreign institution investor inflow of $388.7 million into the country's equity market.

A chief dealer at a private bank said currency revaluation was the reason for the fall in forex reserves. Since the RBI holds a part of the reserves in euro, the fall in the value of the euro could have resulted in the dip, he said.

The euro fell to around $1.19 during this week. This was a 13-month low against the dollar. With the terrorist attacks in London, the sterling also fell to $1.7468 - its lowest since December, 2003.

All the other major currencies had weakened against the dollar during this week.

In terms of the outlook for the rupee, the dealer said it could continue to stay firm.

The inflows have been offsetting negatives such as the spiralling oil prices and the weakening of other major currencies against the dollar.

The country has also registered robust growth in terms of industrial output, he added.

(This article was published in the Business Line print edition dated July 17, 2005)
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