India’s gold and foreign exchange reserves are at record levels, at almost $500 billion, but the rupee is the worst in Asia in the last three months.
This is due to the fact that the Reserve Bank of India (RBI) does not seem to be in the mood to provide free foreign exchange, even though most of its regional counterparts have recovered from virus-induced self-promotion. The Indonesian Rupiah, the high-yield analogue of the Rupiah, is at the forefront.
According to analysts, the central bank is increasing its reserves to avoid a likely downgrading of India’s credit rating or to ensure a greater transfer of surpluses to a low-income government. According to Bloomberg Economics, within four weeks of the 29th. The month of May ended, probably with about $9 billion in the foreign exchange market, bringing their reserves to a record level of $493.5 billion.
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Rubezh is unable to do so due to increased capital inflows caused by increased purchases of dollars by the central bank, said Aninja Banerjee, monetary strategist at Kotak Securities. The adjustment was a sign that the RBI considered the inflow to be temporary and vulnerable to a reversal of the inflow if growth was not restored.
ChartRBI will continue buying dollars at every opportunity to protect itself from contagion, wrote Bank of America Indranil St. Gupta and Aasta Goodwani in their note on Wednesday. The central bank will buy $45 billion and adopt an asymmetric exchange rate policy – to buy a dollar just in case and devalue the rupees if the greenback strengthens at the same rate, they write.
The rupee has lost 2.8% in the last three months and reached a record high of 76.9088 per dollar in April. Thursday at 12:10 p.m. it was traded in Mumbai by 0.3% at 75,7950.
On Indian stock exchanges, foreigners are buying more shares, which was not overshadowed last week by the downgrading of the country’s credit rating by Moody’s Investors Service. In June, they invested $2.7 billion in their shares. The United States, one of Asia’s largest markets, expects the economy to recover faster than expected as the government gradually lifts the world’s largest blockade.
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In addition, Reliance Industries has completed $13 billion worth of transactions for its Gio unit, and a series of share sales, including a $1 billion equity offering by Kotak Mahindra Bank, is expected to increase cash flow to replenish India’s reserves.
The monetary authority does not comment on its day-to-day interventions and has repeatedly stated that it intervenes only to contain unnecessary currency fluctuations. Yogesh Dayal, a spokesman for the RBI, did not react immediately to an e-mail asking him to comment on the market intervention.
While Banerjee Kotaka expects RBI to maintain its dollar exchange rate, Abhishek Goenka, managing director of India Forex Advisors, said the central bank is creating a buffer to protect the economy from degradation and increased bad debt of creditors after the pandemic halted economic activity.
The first one. In June, Moody’s downgraded the country’s rating to the lowest investment level and placed it above high-yield bonds with S&P Global Ratings and Fitch Ratings. Some strategists, including UBS Group AG, expect S&P and Fitch to change their forecasts from stable to negative over the next two months.
It seems RBI could deliberately weaken the rupee by the end of June to strengthen its balance sheet so that it could transfer most of its acquisitions to the government in the form of dividends, Goenka said.