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RBI's February dollar buys highest in 11 months

Date: 12-04-2019
Subject: RBI's February dollar buys highest in 11 months
Mumbai: Reserve Bank of India's spot dollarNSE -0.02 % purchases is at 11 month high in February when RBI purchased $825 million from the market by absorbing foreign portfolio inflows amid weak dollar demand. 

The Reserve Bank of India bought $ 2086 million and sold $1261 million from the spot market in February, resulting in a net spot purchase of $ 825 million in February, according to the latest figures released by the Reserve Bank of India. This is the highest spot dollar purchase by the central since March’18 when it bought $996 million from the spot market during the month. India’s foreign exchange reserves includes other currencies such as euro and yen besides gold rose about $3.7 billion during the month.

It may be recalled that foreign portfolio flows into the Indian stock and debt markets were over $ 2 billion during the month. Also, imports were down 5.41% to $36.26 billion in February due to a dip in gold imports during the month resulting in a subdued dollar demand. 

This is the third consecutive month that the central bank has emerged as net dollar buyer after eight month of consecutive sales from April’18 to November’18 during which it sold over $ 25 billion of dollars from its reserves. 

But the central bank sold about $1.3 billion in the forward markets. The central bank often buys or sells foreign currency in the forward market to neutralise the liquidity impact of such flows. 

Going by the available trends, the Reserve Bank may continue to pile up dollar reserves as the market witnessed a surge in dollar flows in March as well. Besides, the Reserve Bank’s special $5 billion dollar swap scheme under which the central bank bought dollars from the local commercial banks for a period of three years is also expected to prop up dollar flows during the month. A research report by Deutsche Bank notes that the rupee tends to strengthen in the run up to general elections. This is generally propelled by portfolio flows which gives the central bank scope to buy more dollars. 

Source: economictimes.indiatimes.com