FCNR payment, strengthened US dollar deplete Forex reserves

Mumbai, Oct 22 (IANS) A strengthened US dollar and FCNR B (Foreign Currency Non Resident Bank) payments, drained $1.50 billion from India’s foreign exchange (Forex) kitty, experts said on Saturday.

According to the Reserve Bank of India’s (RBI) weekly statistical supplement, the overall Forex reserves fell by $1.50 billion to $366.13 billion for the week ended October 14.

The foreign reserves’ kitty had dipped to $367.64 billion as on October 7, against $371.99 billion on September 30.

“We expect volatility in reserves to continue over the next 8/10 weeks, as FCNR payments drawdown reserves but they are from time to time replenished by maturing long USDINR forward positions of RBI,” Anindya Banerjee, Associate Vice President for Currency Derivatives with Kotak Securities, told IANS.

“On weeks, when FCNR payments will be more than inflows on account of delivery from forward positions, reserves will drop sharply and vice versa.”

Besides, the Foreign Currency Assets (FCAs) which is the largest component of India’s Forex reserves depleted by $1.48 billion to $340.90 billion during the week under review.

Apart from the US dollar, the FCAs consist of nearly 20-30 per cent of other major global currencies, securities and bonds.

The individual movements of these currencies against the US dollar impacts the overall foreign reserves’ value.

According to other analysts, apparent US dollar sales by the RBI to curb volatility in rupee value has also contributed to the decline.

The US dollar had strengthened against Euro and GBP during the week under review. The US dollar index had risen by 1.5 per cent during the week ended October 14.

Lately, the Indian rupee has been on a downward trajectory due to heavy outflows of foreign funds from the equity and debt markets.

The volatile movements triggered by the sell-off could have provoked the central bank to intervene by either buying or selling the greenback.

Nevertheless, the country’s gold reserves were stagnant at $21.40 billion.

Furthermore, the special drawing rights (SDRs) were lower by $8.00 million at $1.46 billion.

Similarly, the country’s reserve position with the International Monetary Fund (IMF) fell by $12.8 million to $2.35 billion.

–IANS

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