Mumbai: India's foreign exchange reserves reached a record high last week according to data released by the Reserve Bank of India , reaching $372.7 billion rising almost $1.6 billion for the week ended April 28.The previous high was at $371.2 billion which was reported on September 9 of last year.Strong inflows of foreign funds into Indian markets have resulted in resurgence in the valuation of the rupee against the dollar, as the RBI has not been entirely able to mop up the dollar inflows.Market sources said that the RBI could be slowly running out of instruments to deal with the excess liquidity generated out of strong inflows."The RBI has been using the MSS (Market Stabilisation Scheme) window aggressively," said Abheek Barua , chief economist at HDFC Bank . "But there is a limit to which this tool can be used."The regulator is also using OMO (Open Market Operations) to manage liquidity as the proposed SDF (Standard Deposit Facility) is yet to become a reality, he said.MSS is a liquidity management tool of the RBI through which the regulator sucks out excessive liquidity out of the system through issuance of securities like Treasury Bills on behalf of the government.Also, OMO is another such instrument of buying and selling of government securities in the open market in order to control the amount of cash in the banking system.Market sources said that while the inflows have been extremely strong over the last few months, causing excessive liquidity in the economy, latest numbers show a moderation in investments in the debt market."There will be some correction in the market as valuations are currently looking stretched," said Barua.According to data from NSDL, the year 2017 has seen foreign investors pumping in Rs 40,345 crore into Indian equities and Rs 50,538 crore into the debt market.Riding high on foreign funds, the Bombay Stock Exchange scaled a record high of 30,133 on April 26.
referring to
Rapid drop in forex reserves a worrying sign
And before the yuan's exchange rate reaches a reasonable level, the forex reserves may fall below some important level, further facilitating exchange rate depreciation, which may lead to a vicious cycle of shrinking forex reserves and accelerated yuan weakness. In my opinion, given market expectations for the yuan's depreciation, curbing the devaluing pace of the currency will inevitably reduce forex reserves. However, if the expectation for one-sided depreciation doesn't change, the consumption of forex reserves to intervene in the market might become endless. In this sense, the central bank has the right to freely use its foreign exchange assets.Second, forex reserves have many more important usages other than maintaining currency stability. Moreover, as domestic savings cannot be fully converted into domestic investment, to a large extent, China's forex reserves are national savings that Chinese residents and enterprises park with the central bank.
India's forex reserves hit lifetime high of $372.7 billion
India's foreign exchange reserves hit a lifetime high of $372.73 billion as of April 28, 2017, after a net inflow of $1.59 billion, according to Reserve Bank of India (RBI) data released on Friday. "The equity markets saw inflows of $6.4 billion, double the $3.2 billion in the corresponding period last year. Gold reserves remained unchanged at $19.87 billion, according to the weekly statistical supplement released by the RBI on Friday evening. Read: SpiceJet facebook/" target="_blank">shares hit record highThe increase in foreign exchange reserves as of April 28 was mainly on account of the $1.56 billion rise in foreign currency assets that rose to $349 billion. Kotak Economic Research said in a note a few days ago that the net inflows into debt and equity markets was $2.9 billion for April 2017.
read more visit us forex
إرسال تعليق