Foreign Exchange Reserves Fall $9.6 Billion as Rbi Defends $/77 Levels | India Business News

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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 data released by the RBI on Friday. The weekly decline was the largest in two years – reserves had fallen by $11.9 billion in the week ended March 20, 2020.
The period of declining foreign exchange reserves coincides with the week that saw the record central bank intervention after the rupiah broke through the 77 mark on March 7. on Russian oil, which pushed crude oil prices towards the $140 level.
“I believe that $9.6 billion would also include RBI’s $5 billion sell-buy swap. Even without the exchange, the $5 billion is not a substantial amount given the war scenario and the uncertainty. But it is not a surprise as RBI sold dollars during the period,” said Ashhish Vaidya, head of treasury at DBS Bank.
Dealers said they estimated sales at more than $1 billion a day during the week as foreign institutional investors sold stocks and pulled out. “The RBI appears to have drawn a line in the sand at 77 and sold heavily to prevent the currency from depreciating,” a dealer said.
According to Vaidya, reserves are unlikely to come under pressure next week as oil prices have corrected and the rupiah has stabilised.
The bright side of the selloff for the RBI is that it would have resulted in record profits in its currency portfolio this month. The central bank buys dollars when the rupee appreciates and sells them when it falls sharply.
During the week ended March 4, reserves increased by $394 million to $631.9 billion. Currently, reserves are nearly $20 billion lower than their all-time high of $642 billion. In the future, the rupee would depend on the direction of the conflict in Ukraine. “If oil supply is secured at $80-85, either by discounted supply from Russia or lower world prices, the rupiah should be stable. But if prices break through $100, they would be under pressure again,” a market expert said. The drop in foreign exchange reserves was entirely due to a decline in foreign currency holdings, which fell by $11 billion to $554.4 billion.
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