Gold Silver Reports → Reserve Bank of India Governor Raghuram Rajan is rebuilding the country’s foreign reserves as he sees an unavoidable slide in the rupee until the war on inflation is won.
The currency stockpile grew by $2.3 billion in the week to Feb. 5, the most since the period ended Sept. 11, according to central bank data compiled by Bloomberg. The reserves have risen $4.3 billion in three straight weeks, the longest run since October, as the rupee fluctuated before declining to within 0.7 percent of its record low on Tuesday.
Rajan said on Feb. 13 a certain amount of depreciation “is necessary” until inflation comes down, noting India’s need to keep its competitive edge in global trade. While the rupee has declined 3.5 percent versus the dollar in the past three months amid outflows from bonds and stocks, it has strengthened against some 22 of 31 major currencies in the period. That leaves the rupee about 24 percent overvalued according to the RBI’s index of its trade-weighted and inflation-adjusted exchange rate. → Neal Bhai Reports