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India’s Forex Drops to $529.99 Bn After Decline In Gold Reserves

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The primary reason is decline in India’s gold’s reserves. This comes after the biggest jump of 2022 which ended on October 28 last week, when the reserves swelled to $531.08 Bn

India’s forex reserves have dropped $1.09 Bn during the week ended November 4 to $529.99 Bn. The primary reason is decline in India’s gold’s reserves. This comes after the biggest jump of 2022 which ended on October 28 last week, when the reserves swelled to $531.08 Bn.

In October 2021, the country’s forex had reached an all-time high of $645 billion. The reserves have been declining as the central bank deploys the kitty to defend the rupee amid pressures caused by global developments. Foreign currency assets (FCA), a major component of the overall reserves, decreased by $120 Mn to $470.727 Bn during the week according to  RBI. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in the foreign exchange reserves.

RBI also said the gold reserves dropped by $705 million to $37.057 billion. India’s reserve position with the International Monetary Fund also dipped by $27 million to $4.82 billion in the reporting week, while the special drawing rights were down by $235 million to $17.39 billion. Further, the country’s reserve position with the International Monetary Fund also dipped by $27 million to $4.82 billion in the reporting week. The forex reserves have been falling due to the capital outflow amid recession concerns and the RBI has spent a significant amount to shore up the rupee. The domestic currency has declined about 9 per cent during the current calendar year.

foreign funds

Old Ways Maybe A Resolve For RBI To Boost Forex Reserves: Economists

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Asian central banks and governments have been relying on certain measures previously to shoot foreign exchanges, may need to reconsider as a second line of defence, says international investments houses.

Looking forward to stabilise a steadily declining rupee, tried and tested measures maybe a resort for the Reserve Bank of India (RBI) to boost its foreign exchange reserves and encourage non-resident Indians to amplify deposits, economists said.

With the RBI protecting the rupee through dollar sales that depleted its forex reserves to 45 billion dollar from the pinnacle of 642 billion dollar a year ago. The Indian currency saw downfall of 9.5 per cent so far this year.

Asian central banks and governments have been relying on certain measures previously to shoot foreign exchanges, may need to reconsider as a second line of defence, says international investments houses.

Banks were allowed to lift up foreign currency non-resident deposits at higher costs and foreign investors were granted permission to buy shorter term local debt as a move to elevate more inflows by RBI in July.

Such measures have only resulted in marginal benefit, said analysts. Measures like those adopted in 2013, when the U.S. Federal Reserve announced its plans to reduce bond purchases which led to the Indian rupee go under pressure, be explored by the central bank, according to analysts.

rupee

Rupee Hits Record Low At 81.63

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Forex traders said, the escalation of geopolitical risks due to conflict in Ukraine, a negative trend in domestic equities and significant foreign fund outflows sapped the investor appetite

The rupee fell by 59 paise to an all-time low of 81.63 against the US dollar in early trade on Monday as the strengthening of the American currency and risk-averse sentiment among investors weighed on the local unit. At the interbank foreign exchange, the domestic unit opened at 81.47 against the greenback, then fell to 81.56, registering a fall of 57 paise over its earlier close of 80.99. 

As of 12:23 pm IST, the Indian Rupee was trading at 81.63 against the US Dollar, as per Bloomberg Data. Forex traders said, the escalation of geopolitical risks due to conflict in Ukraine, a negative trend in domestic equities and significant foreign fund outflows sapped the investor appetite. Rate hikes by the US Fed and Bank of England to contain inflation sapped risk appetite, traders added. 

On Friday, the rupee declined by 30 paise to close at a fresh lifetime low of 81.09 against the American currency. Sriram Iyer, a Senior Research Analyst at Reliance Securities, said, the Indian rupee is likely to remain weaker as investors expect that the US Fed will continue to hike interest rates aggressively to cool inflation. “Focus now shifts to RBI’s meeting this week, with its decision due on Friday. We expect RBI to hike rates by 50 bps to cool stubbornly high inflation and prevent the currency from weakening further,” Iyer added.

Meanwhile, the dollar index, which gauges the greenback’s strength against major currencies, advanced 0.67 per cent to 113.94. Global oil benchmark Brent crude futures fell 0.58 per cent to USD 85.65 per barrel. Meanwhile, India’s forex reserves declined USD 5.219 billion to USD 545.652 billion for the week ended September 16.

fiscal deficit

India Spending Forex Reserves At Quicker Pace Than During Taper Tantrum

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A net of $19 billion was sold in July alone, the most recent data available, and intervention remained heavy in August when the rupee fell below 80 against the dollar, traders said

 India’s central bank is using up its foreign exchange reserves at a quicker pace than during the taper-tantrum period in 2013 as it tries to prevent an overshoot in the rupee, but a larger pool of reserves may allow it to support the currency for some more time, economists said.

The Reserve Bank of India has sold a net of $38.8 billion from its forex reserves between January and July this year, data released on Friday showed.Advertisement · Scroll to continue. A net of $19 billion was sold in July alone, the most recent data available, and intervention remained heavy in August when the rupee fell below 80 against the dollar, traders said.

Alongside its intervention in the spot market, the central bank’s forward dollar holdings have fallen to $22 billion from $64 billion in April.

In 2013, the RBI had sold a net of $14 billion in the June to September period after the so-called taper tantrum—when U.S. Treasury yields spiked after the Federal Reserve said it would slow its pace of bond buybacks—had put pressure on emerging economy currencies, including the rupee.Advertisement · Scroll to continueReport an ad

“The starting point of India’s foreign reserves was at a much higher level in this cycle compared to the taper tantrum, providing a much thicker cushion to withstand global volatility/ shocks,” said Radhika Rao, senior economist at DBS Bank.

Reuters Graphics
Reuters Graphics

MODERATING RESERVE COVER

India’s forex reserves have fallen to a two-year low of $550 billion from a peak of $642 billion in October 2021. Apart from actual dollar sales, reserves are also impacted by a drop in major currencies like the euro and yen against the greenback and a lower valuation of dollar-denominated securities.Advertisement · Scroll to continueReport an ad

The decline in forex reserves and a pick-up in imports has meant that this pool is now adequate to cover about nine months of imports compared to 16 months at the peak.

At the time of the taper tantrum, India’s forex reserves-to-imports cover had fallen to below seven months.

Sticky and elevated imports amid depleting forex reserves led to the import cover falling to its lowest since August 2018, Elara Capital economists Garima Kapoor and Subhankar Sanyal said in a report earlier this month. Forex reserves to external short-term debt moved further below five months.

“Further forex reserve depletion by the RBI to arrest volatility remains the key risk,” said Kapoor and Sanyal.

Reuters Graphics
Reuters Graphics

RUPEE VS. YUAN

The RBI’s defence of the rupee at a time when most currencies are weakening against the dollar has meant the local unit has appreciated against trading peers.

“The Indian rupee has appreciated by about 5% against the Chinese yuan for the fiscal year to date,” said Madhavi Arora, lead economist at Emkay Global Financial Services.

In inflation-adjusted real terms, the rupee has appreciated 8% against the yuan.

“This matters because Chinese exports are seen as a key competitor to both India’s exports abroad and, more importantly, to Indian manufacturing at home,” Arora said.

(Reuters)

Rbi cfo

RBI Publishes List Of Illegal Forex Trading Websites In Alert

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According to the RBI, companies engaging in transactions on electronic trading platforms (ETPs) without authorization or for reasons not covered by the Foreign Exchange Management Act (FEMA) may be subject to penalties under the Foreign Exchange Act

On Wednesday, the Reserve Bank of India (RBI) released a list of organisations engaged in FX trading on unlicensed electronic trading platforms as an alert among the 34 names on the list are OctaFX, Olymp Trade, I-Forex, FBS, Expert Option, Binomo, AVA Trade, IQ Option, Alpari, Forex.com, and TP Global Forex.

The Delhi Capitals team of the Indian Premier League (IPL) are sponsored by OctaFX.Following an increase in instances of consumers becoming victims of such organisations, RBI issued a warning against trading forex on unlicensed platforms in February of this year. 

According to the RBI, companies engaging in transactions on electronic trading platforms (ETPs) without authorization or for reasons not covered by the Foreign Exchange Management Act (FEMA) may be subject to penalties under the Foreign Exchange Act.

Meanwhile, the regulator did not specifically identify any of these organisations at the time, but after receiving several requests for clarification about the authorization of these organisations, RBI was compelled to release a warning list. 

The organisations on the warning list are neither authorised to conduct foreign exchange business in accordance with the Foreign Exchange Management Act of 1999 (FEMA) nor to run electronic trading platforms for such business.

Rbi cfo

RBI Prescribes Norms For Small Finance Banks Looking To Deal In Forex

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Other criteria for entering the forex business include profit in the preceding two years and net NPAs not being more than 6 per cent in the previous four quarters

The Reserve Bank on Monday said small finance banks which have completed two years of operations and have a minimum net worth of Rs 500 crore can deal in foreign exchange.

In a circular, the RBI said this is being permitted with the objective of giving more flexibility to small finance banks (SFBs) to meet their customers’ foreign exchange business requirement.

Other criteria for entering the forex business include profit in the preceding two years and net NPAs not being more than 6 per cent in the previous four quarters.

(PTI)

rupee

Rupee rises 4 paise to 75.69 against US dollar in early trade

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A weak American currency in the international market also helped the local unit, forex traders said.

The rupee appreciated 4 paise to 75.69 against the US dollar in the opening trade on Wednesday, following a rally in domestic equities amid hopes of a breakthrough in Russia-Ukraine talks.

A weak American currency in the international market also helped the local unit, forex traders said.

However, surging global crude prices restricted the gains of the domestic currency, they added.

At the interbank foreign exchange, the rupee opened strong at 75.65 against the US dollar but lost some ground to quote at 75.69, a rise of 4 paise over the last close.

It was moving in a close range of 75.69 and 75.62 in the morning trade.

In the previous session, the rupee had settled at 75.73 against the greenback.

Meanwhile, global oil benchmark Brent crude futures surged 1.02 per cent to USD 111.35 per barrel.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, slipped 0.24 per cent to 98.20.

On the domestic equity market front, the 30-share Sensex was trading 471 points or 0.81 per cent higher at 58,414.94 while the broader NSE Nifty surged 125.65 points, or 0.73 per cent to 17,450.95.

After Tuesday’s talks between Ukrainian and Russian officials, Moscow announced that it will reduce military operations near Kyiv and Chernihiv.

Foreign institutional investors were net buyers in the capital market on Tuesday as they bought shares worth Rs 35.47 crore, according to stock exchange data.

PTI

rupee

Rupee falls 11 paise to 76.35 against US dollar in early trade

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A strengthening US dollar in the overseas market also affected market sentiment, forex traders said

The rupee declined 11 paise to 76.35 against the US dollar in the opening trade on Monday following a negative trend in domestic equities amid concerns over fresh foreign capital outflows. A strengthening US dollar in the overseas market also affected market sentiment, forex traders said.

At the interbank foreign exchange, the rupee opened sharply lower at 76.36 against the US dollar and was moving in a tight range. Later, it rose slightly to quote 76.35, a fall of 11 paise from the previous close. In the previous session, the rupee had settled at 76.24 against the US dollar.

Global oil benchmark Brent crude futures slipped 2.50 percent to USD 117.63 per barrel. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, surged 0.31 percent to 99.12. On the domestic equity market front, the 30-share Sensex was trading 444.32 points or 0.77 percent lower at 56,917.88, while the broader NSE Nifty slipped 123.65 points, or 0.72 percent, to 17,029.35.

Foreign institutional investors remained net sellers in the capital market on Friday as they sold shares worth Rs 1,507.37 crore, according to stock exchange data. Overseas investors have pulled out a net Rs 1,14,855.97 crore from the Indian markets in the current year so far, amid heightened geopolitical tensions and inflation concerns. Foreign portfolio investors have sold domestic equities worth Rs 48,261.65 crore so far this month, taking the year-to-date tally this year to a massive Rs 1,14,855.97 crore, according to depositories data.

PTI

rupee

Rs slumps 26 paise to 76.10 against USD in early trade

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At the interbank foreign exchange, the rupee opened at 76.08 against the US dollar, then slipped further to 76.10, registering a decline of 26 paise from the last close.

The rupee declined 26 paise to 76.10 against the US dollar in opening trade on Monday, following its Asian peers after crude oil prices and the American dollar reversed their recent declines. Besides, a lacklustre trend in domestic equities also weighed on investor sentiment. At the interbank foreign exchange, the rupee opened at 76.08 against the US dollar, then slipped further to 76.10, registering a decline of 26 paise from the last close.

On Thursday, the rupee spurted by 37 paise to close at 75.84 against the US dollar. The forex market was closed on Friday on account of Holi.

Global oil benchmark Brent crude futures jumped 3.10 per cent to USD 111.28 per barrel. The Indian Rupee opened weak against the US dollar as crude oil prices and the dollar reversed some of their recent declines, said Sriram Iyer, senior research analyst at Reliance Securities.

Moreover, most of the Asian currencies have started weaker and will also weigh on sentiments, Iyer noted. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.08 per cent to 98.31. The US Dollar has bounced back from recent declines as Federal Reserve officials said the central bank may need to be more aggressive to deal with inflation, Iyer said.

On the domestic equity market front, the 30-share Sensex was trading 213.2 points or 0.37 per cent lower at 57,650.73, while the broader NSE Nifty slipped 61.10 points, or 0.35 per cent, to 17,225.95. Amid intensifying the Russia-Ukraine conflict, investors assessed diplomatic efforts to negotiate an end to the war. Foreign institutional investors remained net gainers in the capital market on Thursday as they purchased shares worth Rs 2,800.14 crore, according to stock exchange data.

PTI

rupee

Rs slumps 26 paise to 76.10 against USD in early trade

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At the interbank foreign exchange, the rupee opened at 76.08 against the US dollar, then slipped further to 76.10, registering a decline of 26 paise from the last close.

The rupee declined 26 paise to 76.10 against the US dollar in opening trade on Monday, following its Asian peers after crude oil prices and the American dollar reversed their recent declines.

Besides, a lackluster trend in domestic equities also weighed on investor sentiment.

At the interbank foreign exchange, the rupee opened at 76.08 against the US dollar, then slipped further to 76.10, registering a decline of 26 paise from the last close.

On Thursday, the rupee spurted by 37 paise to close at 75.84 against the US dollar.

The forex market was closed on Friday on account of Holi.

Global oil benchmark Brent crude futures jumped 3.10 percent to USD 111.28 per barrel.

The Indian Rupee opened weak against the US dollar as crude oil prices and the dollar reversed some of their recent declines, said Sriram Iyer, senior research analyst at Reliance Securities.

Moreover, most of the Asian currencies have started weaker and will also weigh on sentiments, Iyer noted.

Meanwhile, the dollar index, which gauges the greenback’s strength against six currencies, rose 0.08 percent to 98.31.

The US Dollar has bounced back from recent declines as Federal Reserve officials said the central bank may need to be more aggressive to deal with inflation, Iyer said.

On the domestic equity market front, the 30-share Sensex was trading 213.2 points or 0.37 percent lower at 57,650.73, while the broader NSE Nifty slipped 61.10 points, or 0.35 percent, to 17,225.95.

Amid intensifying the Russia-Ukraine conflict, investors assessed diplomatic efforts to negotiate an end to the war.

Foreign institutional investors remained net gainers in the capital market on Thursday as they purchased shares worth Rs 2,800.14 crore, according to stock exchange data.

PTI

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