Revalue, RBI Dollar Buy Boosts India’s Foreign Exchange Reserves: Report

MUMBAI: The Biggest Jump in India foreign exchange reserves Analysts said on Monday, for more than a year has been driven by the country’s central bank buying dollars and by revaluation.
India’s foreign exchange reserves rose by $14.7 billion in the week to November 11 to $544.72, data released Friday showed. This is the largest reserve since last August.
“I think the RBI made some big dollar purchases (that week) and kept buying,” said Abheek Barua, chief economist at HDFC Bank.
“Combine that with a sizable revaluation due to the depreciating dollar, and we have this reserve increase.”
Reserves fell to their lowest level in more than two years in mid-October to about $525 billion. Since then, it has recovered on the back of the depreciation of the dollar and the purchasing power of the Reserve Bank of India.
For the week ending November 11, the dollar index fell 4%. Expectations that the US Federal Reserve would slow the pace of interest rate hikes after weaker-than-expected inflation data boosted the dollar index’s biggest drop in more than two years.
Yields on long- and short-term Treasuries fell about 30 basis points that week.
Vivek Kumar, economist at QuantEco Research, said nearly half of the reserve increase was due to a falling dollar and falling US bond yields.
The rupee rose about 2% against the dollar that week, hovering around 80.80.
“From the RBI’s point of view, this is a good opportunity to buy dollars and rebuild reserves,” Kumar said.
“They will certainly do it because the nearly $14 billion increase in reserves cannot be explained by dollar forward re-pricing and delivery alone.”
Dollar forward delivery refers to the central bank’s receipt of US delivery money from its forward books. According to the latest RBI monthly bulletin, the central bank has a net outstanding long forward position of $10.4 billion.
Meanwhile, the central bank’s ability to buy the dollar comes amid a resurgence in foreign investment flows. According to data from NSDL, foreign investors bought $3.7 billion in Indian shares this month.


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