Even as the rupee hit a two-year low of 46 in early morning trade today, latest data shows that the Reserve Bank of India (RBI) had pumped in $7 billion, on a net basis, in the forex markets during April-July 2008 to stem the slide in the value of the rupee.
While RBI was active in the forex market last week also, when the rupee fell to 45.73 against the dollar on Friday, the data points to the fact that the central bank’s intervention has had little impact so far this year. Since April, the rupee has depreciated 14.38 per cent against the US currency.
| CURRENCY BLUES RBI sale & puechase of dollar (in $ million) | ||||
| Purchase | Sale | Net | Cumulative | |
| April ' 08 | 4,325 | - | (+) 4,325 | (+) 4,325 |
| May '08 | 1,625 | 1,477 | (+) 148 | (+) 4,473 |
| June' 08 | 1,770 | 6,999 | (-) 5,229 | (-) 756 |
| July '08 | 3,580 | 9,900 | (-) 6,320 | (-) 7,076 |
| (+) Implies purchase including purchase leg under swaps & outright forwards (-) Implies sales including sale leg under swaps & outright forwards Source: RBI Buletien | ||||
In the initial part of last week, RBI intervened through public sector banks late in the day. But on Thursday and Friday, it was active since morning itself, dealers said. The scale of the central bank’s latest intervention in the foreign exchange markets is, however, not known.
“The demand from importers, especially the oil marketing companies, has been quite robust and hence RBI’s efforts to contain further weakening has had very limited impact,” said a senior State Bank of India executive. The trend is expected to continue in the remaining part of 2008-09, he added.
Dealers said the pressure is expected to continue this week as the stock markets are likely to be impacted because of weak global cues and the rupee’s extended fall.
US investment bank Lehman Brothers today said it intended to file for bankruptcy “in order to protect its assets and maximise value”, while the rupee was today quoted at 45.85 against the greenback. The rupee remained range bound in the first half of August and but from then till date its loss in value has been rapid.
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In addition, the foreign institutional investors (FII), who have so far withdrawn around $7.5 billion from the stock markets, have also been responsible for the rupee-dollar exchange rate dipping from 39.98 on April 2 this year. Even as the dollar gathered strength against most international currencies, the rupee is among the top four losers so far in 2008 with only the Pakistan rupee, the Korean won and the Thai baht depreciating more than the Indian currency.
Continuous intervention, FII pullout and the international currency fluctuation has seen India’s foreign exchange reserves dip from an all-time high of $316.17 billion on May 23 to $288.80 billion on September 5. The latest data released on Friday shows that the central bank in July sold about $10 billion on a gross basis, while buying close to $3.6 billion.