 "RBI raises dollar buying from spot market")
The Reserve Bank of India (RBI) had strengthened its dollar purchases from the spot market in December, on the back of softening inflation.
On a net basis, RBI bought $6.7 billion from the spot market, the highest in a month this financial year and more than double the $3.08 billion purchase in November. Also, the net outstanding forward purchases dropped to $6.9 billion from $13.2-billion the previous month.
Inflation stayed high in the first half of 2014, and any intervention in the spot market would have infused liquidity, thus stoking prices. The change in strategy helped to maintain liquidity at a comfortable rate.
In calendar year 2014, RBI net-bought $7.8 billion in March and this dropped to $3.1 billion in November.
RBI has been buying dollars whenever there is an inflow to maintain stability in the exchange rate, also helping it to build foreign exchange reserves.
In April-December, the first nine months of the financial year, net inflows from foreign institutional investors were $33.05 billion.
In December, the domestic markets attracted a net flow of $1.7 billion.
When the intervention is done through forward contracts, there is no immediate rupee liquidity flowing into the system due to dollar purchases.
Currency experts feel RBI might continue its intervention in the spot market, as this is the fourth quarter and there will also be advance tax outflow.
Foreign exchange reserves rose to an all-time high of $328 billion for the week ending January 30.
On a net basis, RBI bought $6.7 billion from the spot market, the highest in a month this financial year and more than double the $3.08 billion purchase in November. Also, the net outstanding forward purchases dropped to $6.9 billion from $13.2-billion the previous month.
Inflation stayed high in the first half of 2014, and any intervention in the spot market would have infused liquidity, thus stoking prices. The change in strategy helped to maintain liquidity at a comfortable rate.
In calendar year 2014, RBI net-bought $7.8 billion in March and this dropped to $3.1 billion in November.
RBI has been buying dollars whenever there is an inflow to maintain stability in the exchange rate, also helping it to build foreign exchange reserves.
In April-December, the first nine months of the financial year, net inflows from foreign institutional investors were $33.05 billion.
In December, the domestic markets attracted a net flow of $1.7 billion.
When the intervention is done through forward contracts, there is no immediate rupee liquidity flowing into the system due to dollar purchases.
Currency experts feel RBI might continue its intervention in the spot market, as this is the fourth quarter and there will also be advance tax outflow.
Foreign exchange reserves rose to an all-time high of $328 billion for the week ending January 30.