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RBI Tries Forex Balm to Calm Redemption Stress

RBI Tries Forex Balm to Calm Redemption StressGold Silver Reports — RBI Tries Forex Balm to Calm Redemption Stress — The Reserve Bank of India seems to have started digging into the country’s foreign exchange reserves to ease the pressure on rupee with dollars flowing out of the system amid redemption of FCNR-B (foreign currency non-resident-bank) deposits. 

The country’s foreign exchange reserves dipped $4.344 billion in the first seven days of October. Dealers in the currency market said that the RBI could have used the reserves to withstand the redemption pressure even as the depreciation in the valuation of reserves held in euro and pound sterling has also contributed to the fall.

The reserves were at $367.647 billion at end of October 7, RBI data showed. The central bank does not cite any reason for the reserves movement.

“It wouldn’t be surprising if RBI started using the reserves as there is a sharp weekly fall,“ said Paresh Nayar, head of forex and fixed income at FirstRand Bank.

India is expected to see a likely $26 billion outflow in the next two months, putting pressure on the local currency as well as reserves, as FCNR-B deposits raised under a special scheme in 2013 are hitting maturity .

“There is a possibility that RBI is using its reserves as redemption of FCNR-B has started,“ said KN Dey , executive director at Mecklai Financial.

The rupee is already seen under pressure and has fallen to 66.88 a dollar on Friday’s close compared with 66.68 a week back.

India’s foreign currency assets, which is 93% of forex reserves, fell $4.317 billion to $342.394 billion reflecting the sharp fall in valuation of the forex held in pound sterling, dealers said. Last week, the British currency fell to its lowest level since 1985. India holds reserves in dollar and other major foreign currencies such as pound, euro and Japanese yen.  — Neal Bhai Reports

RBI Tries Forex Balm to Calm Redemption Stress

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