India’s foreign exchange reserves hit a fresh all-time high of $343 billion as on April 3, rising by $1.6 billion during that week, data from the RBI showed.
Forex reserves have jumped by $36.36 billion over the last one year on the back of aggressive dollar purchases by the RBI from the market. In a separate data release, the central bank said it had bought $7.87 billion from the spot dollar/rupee market besides also buying through forward contracts. The outstanding position of the RBI in the forward market rose to $5.8 billion in February from $5.6 billion in January.
Between April and December 2014, the RBI had bought a total $75 billion from the forex market. In January, it bought another $12.13 billion.
The RBI had been aggressively mopping up dollars to curb the rupee’s appreciation as well as shore up reserves. In fact, the RBI has absorbed almost all the inflows into the local debt market. While the RBI has maintained that it intervenes only to curb volatility in the forex market and not specifically to shore up reserves, the time to buy dollars has never been more conducive for the central bank. FIIs have poured a net $32 billion into Indian bonds during April-December and have invested another $4.5 billion so far in 2015.
Ever since large outflows from the local bond market dragged the rupee to an all-time low of 68.85/$ in August 2013, the RBI has been cautiously building reserves.
The rupee closed at 62.32/$ on Friday and has remained in a narrow 61-63/$ band over the last six months. Meanwhile, the benchmark 10-year bond yield ended up 3 bps at 7.8% as traders pared positions.