BANKING
| At $ 7.8 billion, RBI $ sales hit 40-month high Tue, 14 Feb 2012 21:02:23 GMT |
| Business Standard Economy Policy News MUMBAI: The Reserve Bank of India sold $7.8 billion dollars, the highest in nearly 40 months, to prevent an accelerated slide of the Indian rupee versus the US dollar on speculation that weak economic fundamentals will lead to foreigners pulling out funds. The central bank sold a cumulative $12.5 billion dollars between September and December last year, data from the RBI shows. The December sales were the highest since October 2008, the month after Lehman Brothers filed for the biggest-ever bankruptcy that led to money markets seizing up. The RBI had then sold $18.7 billion. "Given that the rupee is trading comfortably under 50 now, we think it is time for the RBI to pick some forex reserves, purely from a risk-management point of view," said Taimur Baig and Kaushik Das, economists at Deutsche Bank. Last year, the Indian rupee was the worst-performing currency in Asia as it fell nearly 16%. The central bank, besides selling US dollars, also imposed curbs on speculative positions and tinkered with other trading limits. The rupee has since become the best performer in Asia after touching a life low of Rs 54.30 on December 15. If the central bank behaves accordingly, there may not be much more room for the exchange rate to appreciate. "This could be a win-win, in our view: the year-to-date appreciation has already mitigated much of the inflation passthrough concerns; exporters will still find a competitive rupee in 2012 relative to the previous year; and the central bank will be able to rebuild the reserves lost ($15bn) in the turbulent fourth quarter of last year," Baig and Das said in their report. |
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