Forex Reserves Fall By $9.6bn As Rbi Defends 77/$ Levels | India Business News – Times of India

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Mumbai: The country’s foreign exchange reserves fell by $9.6 billion to $622.3 billion in the week ended March 11, according to the data released by the RBI on Friday. The weekly drop was the sharpest in two years — the reserves had declined by $11.9 billion in the week ended March 20, 2020.
The period of decline in forex reserves coincides with the week that saw record intervention by the central bank after the rupee breached 77 on March 7. The currency came under pressure in the wake of the worsening situation in Ukraine, the subsequent sanctions imposed by the West on Russian oil which resulted in crude oil prices inching towards the $140 level.
“I believe that this $9.6-billion would also include the RBIs $5-billion sell-buy swap. Even without the swap, the $5-billion is not substantial amount given the war scenario & uncertainty. But it is not a surprise as RBI the was selling dollars during the period,” said Ashhish Vaidya, head of treasury at DBS Bank.
Dealers said that they estimated sales of over $1 billion a day during the week as foreign institutional investors sold shares and exited. “The RBI appears to have drawn a line in the sand at 77 and sold heavily to prevent the currency from depreciating,” said a dealer.
According to Vaidya, the reserves were unlikely to come under pressure in the subsequent week as oil prices corrected and the rupee stabilised.
The positive side of the sale for the RBI is that it would have resulted in record profits in its forex portfolio this month. The central bank buys dollars when the rupee is appreciating and sells them when it falls sharply.
In the week ended March 4, the reserves rose $394 million to $631.9 billion. Currently reserves are nearly $20 billion below their all-time high of $642 billion. Going forward, the rupee would depend on the direction of the conflict in Ukraine. “If oil supply is assured at $80-85, either through discounted supply from Russia or easing of global prices, the rupee should be stable. But if prices cross $100 it would come under pressure again,” a market expert said. The decline in forex reserves was entirely due to a drop in the foreign currency assets, which fell by $11 billion to $554.4 billion.



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