Return
to Story Page
To print: Select File and then Print from your
browser's menu
Vidya Ranganathan
Mumbai, July 17: Strong dollar inflows following the withdrawal of infiltrators from Kashmir will help the Reserve Bank of India (RBI) rebuild its foreign exchange reserves, dealers said on Saturday.
India's foreign exchange reserves fell by $105 million to $32.904 billion in the week to July 9, the RBI said in its weekly statistical supplement on Saturday. Reserves have fallen by $628 million during the Kashmir crisis, after hitting an all-time high of $33.532 billion on May 28. Dealers attributed the drop in reserves to central bank intervention to support the rupee. The rupee dipped to a low of 43.42 per dollar during the second week of July on dollar purchases by a few large corporates and institutions with liabilities falling due in July.
But since last weekend's agreement between India and Pakistan allowing the infiltrators to withdraw, the rupee has been trading in firmer ranges and ended Friday at 43.23/24.
India said on Saturday the withdrawal of infiltrators from its side of the militarycontrol line in Kashmir was almost complete. Dollar inflows have been heavy after last weekend's agreement between the two nuclear-capable neighbours and dealers said the currency market had reverted to its pre-Kashmir conflict mode. "The State Bank of India had made dollars available when the rupee fell below levels of 43.40 for the second time during the Kashmir conflict," said the chief dealer of a foreign bank. SBI and some other state-run banks are viewed by local currency traders as central bank surrogates. "But, of late they (SBI) have resumed their pre-crisis strategy of absorbing dollar supplies. The market too has seen a significant shift and is back to a dollar supply-driven mode," he added. With worries over Kashmir put behind, there has been a surge in foreign fund inflows to Indian stock markets.
The benchmark Bombay exchange index closed 6.3 per cent higher last week at 4,639.94 after hitting an all time high of 4,810.33 on Thursday. Foreign funds bought a net of $172.2 million of equities infour trading days of last week. They invested $295.9 million from July 1-15 compared to $100.5 million in the whole of June. Dealers said the inflows help the central bank in two ways - by buying dollars, it builds up its reserves and simultaneously releases liquidity to the money market to help push through a heavy Government borrowing programme.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------