Forex reserves rose by $1.40 billion last week to an all-time high of $344.60 billion, RBI data showed. The reserves touched a new high despite rupee hitting a four-month low on Thursday.
The reserves have jumped by $34.69 billion over the last one year on the back of aggressive dollar buying by RBI from the market. The central bank bought $82 billion between April 2014 and March 2015 from the spot dollar/rupee market as well as through forward contracts. RBI had been aggressively mopping up dollars to curb the rupee’s appreciation and shore up reserves. In fact, RBI has absorbed almost all the inflows into the local debt market. In 2015 so far, FIIs have poured in a total $14.6 billion into shares and bonds.
Inflows into debt and equity have slowed down with April seeing more instances of outflows than inflows. Between April 27 and April 30, foreign investors pulled out $610.6 million from shares. RBI has maintained that it intervenes only to curb volatility in the forex market and not specifically to shore up reserves. Indeed, RBI was seen selling dollars on some trading sessions in April to curb volatility in the dollar/rupee pair.