The Hindu Business Line : Forex reserves swell by a record $11.9 billion

Mumbai, Oct. 5 The country’s foreign exchange reserves surged by $11.871 billion to touch $247.762 billion for the week ended September 28, 2007. The rise in reserves is easily an all-time record. In the recent past, there have been some instances of huge accretion as for instance on February 9, 2007 the reserves jumped by about $5 billion. Other significant increases include: June 1, 2007 - $ 3.439 billion, February 9, 2007 - $ 5.031 billion, February 16, 2007 - $ 4.212 billion, April 28, 2006 - $ 3.415 billion, April 9, 2004 –$ 3.370 billion.

According to dealers, this is largely because the RBI had been purchasing dollars last week to keep the rupee from appreciating against the US dollar. According to Mr Ajay Mahajan, Group President, Financial Markets and Private Banking, Yes Bank, “This is mainly because the RBI has been buying dollars. Otherwise, there was no real swing in the value of foreign currencies.”

On Friday, the RBI announced that Treasury-bills worth Rs 5,000 crore would shortly be auctioned under its Market Stabilisation Scheme in addition to auctions of two government papers for Rs 18,000 crore next week.

Mr Mahajan said that the large amounts under auction corroborated the point about the excessive inflows into the system. “It is a huge challenge for monetary policy to control the flows,” he said.

Speaking in the course of interaction with the audience at an RBI function on Friday the governor, Dr Y V Reddy made the point that there have been huge inflows from different parts of the globe and controlling it is proving to be difficult. He however reiterated that the Bank has no option but to face up to the challenge.

For the week ended September 28, the rupee moved from 39.76 to 39.81 against the dollar, though it touched a high of 39.62 in the week. The RBI bought dollars through nationalised banks to keep the rupee from appreciating sharply.

As per the Weekly Statistical Supplement of the RBI, the foreign currency assets rose by $ 11.383 billion to touch $239.955 billion in the week under consideration.

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.

Related Stories:
Forex interventions successful: RBI report
RBI picks up $4.4 b in May
Forex kitty swells $4.12 b, touches $219 b
Rising rupee leaves RBI poorer by Rs 65,000 cr