India’s foreign exchange reserves rose to $531.1 billion in the week to October 28. (Representative))
Mumbai:
Economists said today that the major jump in India’s forex reserves in the last week of October was due to a softening dollar and changes in the central bank’s forward book.
Data released by the Reserve Bank of India (RBI) on Friday showed that India’s foreign exchange reserves rose by $6.5 billion in the week to $531.1 billion, their biggest weekly increase since September 2021. .
“This is mainly due to the revaluation change on the back of the dollar’s fall,” said Vivek Kumar, an economist at QuantEco Research.
“Another thing that could have caused this is the change in the RBI’s forward reserves.”
They estimate that revaluation changes may “at best” account for $3 billion of the total change in reserves.
In the week for which the data was released, the dollar fell about one percent against its peers, while the longer-term Treasury yield also declined.
In September, RBI Governor Shaktikanta Das said valuation changes were responsible for about 67% fall in foreign exchange reserves in the first half of the current fiscal.
Meanwhile, the RBI’s latest monthly bulletin showed that as of August 31, the central bank had net dollar sales of $8.2 billion at the close of less than a month, but outstanding of $9.5 billion in a month. Dollar buying position. Up to three months bucket.
It is possible that the RBI may have taken delivery of the forward dollar on maturity, Kumar said.
Bank of Baroda Chief Economist Madan Sabnavis said RBI mostly squares off their forward positions, if they take delivery of forward dollar purchases, it will increase reserves.
Madan Sabnavis said it was difficult to reconcile the weekly change in reserve.
“Revaluation changes, portfolio flows and trade deficit flows are important measurables for estimating the trend on reserves.”
Last week, Shaktikanta Das said that the pace of forex outflows has slowed down.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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