Mumbai: The country’s foreign exchange reserves have risen by $430 million to $280.3 billion in the week ended October 2, the Reserve Bank of India said in its weekly statistical supplement released on Friday.
While foreign currency assets declined by $33 million to $263.5 billion, gold reserves climbed by $488 million to $10.3 billion, the RBI said.
Meanwhile, with the increase of foreign inflows into the Indian market and dollar turning weak against other major international currencies like euro and yen, rupee has strengthened by almost 3% during the week.
However, after continuously appreciating for last few days, rupee on Friday fell to 46.41 against the dollar compared to 46.35 on Thursday.
Dealers said that several banks and companies transacted in the non-deliverable forward market (NDF) during the week to hedge their onshore exposure and make profits from the spreads between onshore and offshore currency exchange rates.
“The rupee has gained widely against the dollar in the five sessions to Thursday, due to the arbitrage trade to gain from lower dollar rates in the NDF market. Dealers have bought dollars offshore to sell them at higher rates in the domestic market,” noted a trader.
Rupee has also seen some strengthening against the dollar owing to expectations of a monetary tightening, taking cues from a rate hike by Australia earlier this week.
“The RBI’s 25 bps hike in its effective lending rate has paved the way for other central banks in the region to move to a more hawkish stance,” said Abheek Barua, chief economist with HDFC Bank, adding that ECB flows, FDI, trade credit and other debt flows will also play a critical role in determining the currency’s direction and momentum.
“Debt inflows in particular could pick up given the emergence of the differential monetary policy stance adopted by central banks in the developing world as against the advanced countries.
Barua expects the rupee to trade in the range of 46-47.20 in the near-term and move to a trading range of 45-46 by December 2009.
Special drawing rights with the International Monetary Fund fell by $20 million to $5.2 billion while its reserves with the IMF dropped by $5 million to $1.36 billion.
Foreign exchange reserves dropped by $36.01 billion in the past year, the bank said. The reserves comprise overseas currencies, gold and special drawing rights with the IMF.
The bond markets on Friday were choppy.
The yields hardened by 5-10 bps across tenors...
Financial Express
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