RBI bought $2.47 bn post-yuan revaluation

The Reserve Bank of India turned a net buyer of dollars in July, the first time this fiscal. The RBI bought $2.473 billion that month, according to the central bank's bulletin released on Wednesday. Most of these purchases were made after the revaluation of the Chinese yuan was announced, currency dealers said.

"We believe that the entire buying would have been after July 21, when the yuan revaluation was announced," a senior dealer at a US bank here said. "They (RBI) had not been buying before that and whatever demand was there it was genuine corporate demand."

On July 21, China scrapped the yuan's peg to the greenback and revalued the exchange rate by 2.1 per cent to 8.11 yuan per $1 from 8.28 yuan.

The rupee, which had been moving around Rs 43.50 per $1 before the yuan revaluation, rose to a 6-year high of Rs 43.15 per $1 following the surprise announcement. But the rupee gave up its gains over the next few days because of continued dollar buying by the RBI through some state-owned banks.

The central bank's purchases were aimed at tempering the volatility in the rupee's exchange rate and as a steep rise in the currency would hurt exports.

According to dealers, central banks across Asia had intervened to prevent a sharp appreciation in their currencies. South Korea, Malaysia, and Turkey also resorted to dollar purchases.

Back home, RBI's dollar buys lifted the country's foreign exchange reserves to $140.6 billion as on July 29, compared with $137.5 billion previous week.

Before July, the RBI had bought dollars in March to the tune of $6.03 billion. In June, they had sold $103.6 million.