For the first time since the global credit crisis intensified in September 2008, the Reserve Bank of India (RBI) has turned a net buyer of foreign currency.
According to data released On Friday, on a net basis, RBI purchased foreign currency worth $230 million (or Rs 335.79 crore) as against net sales every month from September 2008 to January 2009.
In February, RBI bought foreign currency worth $1.06 billion, while its sales were estimated at $833 million. During April-February, RBI sold foreign currency worth $31.53 billion (Rs 1,60,765 crore) on a net basis, as against purchases of $75.39 billion (Rs 3,00,874 crore) in the same period in 2007-08.
The RBI has followed a policy of buying or selling foreign currency to check steep volatility. After the credit crisis intensified, FIIs increased the sale of Indian shares, putting pressure on the rupee. This prompted RBI to sell foreign currency worth $20.63 billion in October. With global uncertainty on the wane, RBI has limited its role in the market, though the rupee touched a new all-time low of 52.18 against the dollar in early March.
“If the trend has continued in March and so far in April, then we could see some accretion to forex reserves. Besides, RBI may not be buying dollars actively in the market on high liquidity,” said the head of treasury at a large public sector bank.
At February-end, forex reserves were estimated at $247.27 billion. According to the RBI data released On Friday, forex reserves fell by $2.18 billion during the week ended April 10 to $252.98 billion, which is $59.39 billion less than the corresponding period last year.
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The fall during the week was attributed to the revaluation of currencies.
RBI intervention in the foreign exchange market was also said to have resulted in one-third of the fall in reserves, while the rest was attributed to revaluation losses.
On Friday, the rupee closed at 49.865 against the dollar, as against 49.67 yesterday.