A massive appreciation in euro value outweighed the gold devaluation impact, resulting in India’s foreign exchange reserves (Forex) coffers gaining $483.2 million, experts said on Saturday.
According to the Reserve Bank of India’s
weekly statistical supplement, the Forex reserves stood at $352.09
billion for the week ended December 4.
For the previous week ended November 27,
the country’s foreign reserves had depleted by $750.2 million and stood
at $351.61 billion.
As per Anindya Banerjee, associate vice
president for currency derivatives with Kotak Securities, a massive
currency revaluation had outweighed a major devaluation in gold value.
“There was a massive rally in euro value
against the US dollar in the week under review. Euro had appreciated by
three percent against the US dollar ahead of the European Central
Bank’s (ECB) monetary policy review which was held on December 3,”
Banerjee told IANS.
“The euro had rallied on expectations
that the ECB will go in for another round of its bond buying program.
This currency revaluation resulted in India’s Forex reserves making
gains during the week under review.”
The ECB had cut its deposits rate by 10 basis points and extended its bond-buying program till at least March 17, 2016.
Besides the euro, the US dollar had depreciated against other major global currencies such as pound sterling and yen.
This strengthened the foreign currency
assets (FCAs) which constitutes the largest component of India’s Forex
reserves. The FCA gained by $1.58 billion at $329.24 billion in the week
under review.
Apart from the US dollar, the FCA consists of nearly 20-25 percent of other major global currencies, securities and bonds.
The individual movements of these currencies against the US dollar impacts the overall foreign reserves’ value.
In addition to the currency revaluation,
dollar buying by the RBI and low crude oil prices were cited by other
analysts for the reserves’ gains for the week under review.
“RBI’s buying activities and low crude
oil prices might also have attributed to the the rise in the overall
reserve value,” Hiren Sharma, senior vice president, currency advisory
at Anand Rathi Financial Services, told IANS.
Notwithstanding the rise in the FCA, the
country’s gold reserves which had remained stagnant since the week
ended November 6, plunged by $1.14 billion at $17.54 billion.
Gold prices had plunged during the week
under review to a six-year low in the domestic and international markets
amid fears of the US Federal Reserve hiking short-term interest rates
at its December 15-16 monetary policy meet.
However, the special drawing rights (SDRs) were higher by $38.1 million at $4 billion.
Similarly, the country’s reserve
position with the International Monetary Fund (IMF) rose. It gained by
$12.3 million to $1.29 billion.
