RBI sold $20.1 billion in March to defend the rupiah, Auto News, ET Auto

The central bank in its bulletin also said inflationary pressures were increasingly broadening across commodity groups.

MUMBAI: The Reserve Bank of India (RBI) sold $20.1 billion net in the foreign exchange spot market in March to support the rupee against the US dollar, its monthly bulletin said on Tuesday.

The central bank said its net outstanding dollar forward purchases stood at $65.79 billion at the end of March, down from $49.11 billion at the end of February. By February, the RBI had sold $771 million net in the spot market.

The rupee moved in a band from 75.76 to 76.97 in March.

In March, the rupee hit its first record low of the year, dropping below 76.9050 per dollar, which was last touched on April 22, 2020 amid the Covid-19 pandemic.

The unit has now hit several record lows over the past two weeks due to overall dollar strength and severe risk aversion, hitting an all-time low of 77.7975 earlier in the day.

“Given that the RBI has large foreign exchange reserves, we expect the rupee to remain more stable and weaken less than most other emerging market currencies against the greenback over the next couple of years. “, Adam Hoyes, deputy economist at Capital Economics, said in a note.

Foreign exchange reserves fell to $595.95 billion as of May 6 from $597.73 billion a week earlier, the latest RBI data showed last week.

Reserves had reached a record high of $642.45 billion in early September 2021.

The central bank in its bulletin also said inflationary pressures were increasingly broadening across commodity groups. He said the monetary policy committee’s quick reaction in raising rates showed its strong commitment to price stability.

The MPC raised the policy rate by 40 basis points at an unscheduled meeting on May 4 and most economists expect further hikes at its upcoming meetings.

“Increased global risks from weaker growth, high inflation, supply disruptions due to geopolitical fallout, and financial market volatility from synchronized monetary tightening pose near-term challenges” , the central bank wrote.

He said India’s economic recovery remained resilient, although risks from global developments had thwarted momentum and rising international commodity prices were widening the country’s trade and current account deficits.

“In order to achieve a higher growth trajectory on a sustainable basis, private investment must be encouraged by higher capital expenditures by government, which attract private investment,” RBI said.

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