MUMBAI: India’s foreign exchange reserves dipped $2.4 billion to settle at $360.6 billion, one of the lowest levels since May of this year, as market sources said that the Reserve Bank of India could be selling dollars heavily in order to arrest the slide in the value of Rupee.
“A combination of factors may have triggered the fall,” said Ashutosh Khajuria, executive director, Federal BankBSE -1.21 %. “The last leg of FCNR(B) redemptions has put pressure on the Rupee to an extent while RBI’s routine intervention may also have led to an erosion of the reserves.”
While one of the steepest falls in the last few months in RBI’s dollar reserves was seen in early October due to FCNR(B) outflows starting off, a strengthening dollar and consistent outflow of foreign portfolio investors from the country has also created some pressure on the Rupee lately.
“The RBI had definitely intervened when Rupee had hit 68.8 few days back and even now the value of the currency has been held steady at around 68 due to heavy selling of dollars,” said market sources.
Another source of the fall could also be some revaluation of non dollar assets of the RBI against its Dollar assets as the central bank holds foreign currency in multiple currencies.
According to NSDL, foreign portfolio investors have sucked out Rs 22,771 crore from both Indian equity as well as debt markets in the month of December.
Source: economictimes.indiatimes.com