Mumbai, July 11 (IANS) India’s foreign exchange reserves tripped on Greece’s debt crisis and Chinese stock markets crash and plunged by over $700 million for the week ended July 3.
Analysts attributed the fall in reserves to an appreciating dollar vis-a-vis other international currencies and declining gold value.
Data furnished by the Reserve Bank of India (RBI) in its weekly statistical supplement, showed that India’s foreign exchange reserves plunged by $704 million and stood at $354.51 billion.
For the week ended June 26, the reserves had fallen by $237.5 million and stood at $355.22 billion. The reserves had grown by $1.17 billion and stood at $355.45 billion during the week ended June 19.
“The reserves were negatively impacted by the depreciation of major currencies like Euro and Pound against the dollar due to the Greece crisis,” Anindya Banerjee, senior manager for currency derivatives with Kotak Securities, told IANS.
While the dollar appreciated by nearly 2 percent, the Euro and Pound declined by 1.5-2 percent. Even, gold value declined.
Nearly 20-25 percent of the Indian reserves are made up of non-dollar currencies. The individual movements of these currencies against the dollar impacts the overall reserve value.
“The Reserve Bank continued to buy dollars as it is pretty active in the forward purchase markets since the last 20-23 months. The currency corrections due to the Greece crisis affected the reserve position vis-a-vis dollar purchases,” Banerjee said.
The RBI sells dollars whenever the rupee crosses the Rs.64 mark and buys when it falls below Rs.63. Though at a very short range, experts believe that the RBI seems to be comfortable with the rupee ranging anywhere between Rs.63-Rs.64.30 per dollar.
The rupee has been exceptionally resilient to the Greece crisis and has not shown any major signs of volatility.
According to Banerjee, it is expected that the reserves might gain substantially in the coming weeks as the Greece crisis gets resolved and Chinese markets stabilise.
The Mediterranean country is expected to give a new proposal of austerity and reform measures to its creditors to avail a new bailout package after rejecting earlier terms set by the lenders.
The Chinese markets performance will also be closely monitored here. The recent downturn eroded nearly 40 percent of the bourses stock value.
Though there has been some bounce back in the Chinese indices, the initial inability of the Chinese government, fund houses and brokerage firms to arrest the fall is a worrying factor.
During the week under review the foreign currency assets (FCAs) which constitute the largest component of the forex reserves declined by $410.1 million and stood at $330.09 billion.
The country’s gold reserves fell by $265.9 million at $19.07 billion. The bullion had remained stagnant at $19.34 billion since the week ended May 1.
The special drawing rights (SDRs) were down by $21.2 million to $4.04 billion. The country’s reserve position with the International Monetary Fund (IMF) slipped by $6.8 million to $1.31 billion.