Forex reserves $2 billion

Foreign exchange reserves rose $2 billion during the week ended May 23, though the central bank sold dollars during the week to meet importers demand. According to the latest figures released by the Reserve Bank of India in its weekly statistical supplement (WSS), total foreign exchange reserves including gold and special drawing rights (SDR) rose $2,090 million during the week ended May 23.

Almost the entire growth in reserves during the week has been on account of the growth in assets which went up $2,085 million. Reserves with the IMF rose $5 million, though the value of SDRs and gold in reserves remained unchanged during the week.

The central bank reportedly sold dollars during the week to meet oil importers demand. Besides, the dollar also strengthened vis-a-vis major currencies during the week. However, foreign currency assets expressed in dollar terms also includes the effect of appreciation/depreciation of non-dollar currencies (such as euro, sterling, yen) held in reserves.

The $2 billion pile up in reserves has resulted in infusion of rupee funds worth Rs 15,044 crore during the week. Though that helped ease liquidity conditions during the week, it tightened in the subsequent week.

But, the reserve money of which foreign currency assets is a major sources dipped Rs 42,439 crore during the week on account of a Rs 44,176 crore dip in the net RBI credit to the government during the week.

In the other developments, the government did not resort to any ways and means advances (WMA) — temporary overdraft to meet revenue mismatches during the week. States have reduced their reliance on WMA by Rs 215 crore taking the WMA outstanding with the central bank to Rs 303 crore as on May 23.

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Rupee ends

The Indian rupee ended slightly cheaper at 42.72/73 against the greenback on Monday on month-end dollar demand by oil companies, amid continued weakness in Asian stocks. Local currency fluctuated in a wide range of 42.7950 and 42.53 during the day after resuming weak at 42.7900/7950 a dollar from its last close of 42.71/72 a dollar. Dealers said the rupee attempted a smart rally and touched the day's high of 42.53 in early trade due to heavy dollar selling by foreign banks. Global crude oil was trading above 133 dollars a barrel in Asian trade on Monday, Asian stocks were under tremendous pressure and stayed weak for the last few days on fears that high inflation rate and weakness in the US economy.
Sensex lost 301 points to touch the six-week low of 16,348.50 points Meanwhile, the Reserve Bank fixed the reference rate for US dollar at Rs 42.56 and that for single European unit at Rs 67.08.

Burden on forex exchange

The government would have to spend at least one billion dollar on the import of wheat, as the prices in international market have touched $400 per metric tonnes, the industry stakeholders told Daily Times on Tuesday. The government announced on Monday to import 2.5 million tonnes of wheat to build strategic reserves for two years. The price of wheat in international market also increased after the announcement of import by Pakistan. Earlier the price was roaming at $380 but as soon the wheat import was announced the rate in international market swell to $400 per metric tonnes, said a trader, Sharif Hussain.
If the tender are floated then there would be a speculation in international market and price would ultimately increase and definitely touch $450. Ukraine and Russian wheat would come into market by July and shipments would be made in August,” he said.
FOB price of wheat is around $320 to $340 while CFI (Cost Insurance Freight) price is $400-425, as freight also increased rapidly because of an increase in petroleum prices in the international market.

Dollar softer in afternoon

The U.S. dollar was trading slightly weaker in narrow ranges versus the euro and the yen in afternoon Asian trade on Wednesday ahead of the release of the minutes from last month's Federal Open Market Committee meeting that may highlight worries about growth and inflation in the United States. 'The general tone of the April FOMC minutes is likely to underscore the still sluggish growth environment, elevated inflation uncertainties and the tentative improvements in financial markets through the end of April.
April 29 to 30 FOMC meeting will be released tonight in Washington.
Last month, the FOMC slashed its key rate by 25 basis points, the smallest reduction this year, to 2 percent and hinted at plans to maintain it at this level for a while.

Forex Dollar Dip

Dollar slips versus euro in response to tame CPI

The dollar erased its earlier gains on Wednesday in a knee-jerk reaction to a report showing U.S. consumer prices rose at an unexpectedly slower pace in April. Analysts said news that consumer prices rose by 0.2 percent in April, less than the 0.3 percent gain Wall Street analysts expected, did not change market perceptions that the Federal Reserve's interest rate cutting-campaign was almost over. The consumer price index rose 0.3 percent in March.
Rate implications are dollar negative, and that is the way the market has traded off this number," said Alan Raskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.

Dr Akhtar: $3.5bn inflows

In Pakistan Foreign exchange inflows to the tune of $3 billion to $3.5 billion are expected to come in the banking system in the short to medium-term, said Dr Shamshad Akhtar, governor State Bank of Pakistan here Friday.
During a meeting with heads of commercial banks at the SBP head office, Dr Akhtar assured the participants that there would be ‘no reversal’ of foreign exchange liberalisation measures seen in the past years.
However, she expressed her concerns over excessive volatility and weakened Exchange Rate and commented that the recent behavior of the exchange market “is totally out of line.”
There is a strong recognition that macro-economic imbalances have to be resurrected and this is the corner stone of Government’s economic policy,
Dr Akhtar informed the meeting that the government has taken steps to mobilise foreign funds and added that some of the inflows which are expected to realize soon include $2.1 billion from Multilateral Banks, $500 million from friendly countries, $200 million for earthquake relief, $100 million from DFID, $700 million from MCB Bank’s stake sale, $100 million from Barclays Bank and the rest through private sector GDRs and other regular sources.

Dollor Range Bound

In London: - The dollar was trading in a range against most currencies as investors look to the upcoming payrolls data for more direction and a better sense of how hard the U.S. labour market is being hit by the credit crunch
The market is forecasting a 75,000 loss in jobs in April after March's 80,000 fall, although ADP's forecast for a 10,000 increase will have caused expectations to improve.