Surging dollar leaves Reserve Bank of India reserves poorer by $17 bil

18/05/2015 06:21 AST

It is not just the traders and corporates which have been at the receiving end of the dollar appreciation. Even the central bank took a hit as the dollar's rally eroded the value of other foreign currencies held in reserves and made it poorer, as per mark-to-market estimates, by about $17 billion.

The Reserve Bank of India holds foreign currency assets in currencies such as the US dollar, euro, pound sterling and Japanese yen. But the reserves are denominated and expressed only in dollars, which means any fluctuations in the value of the greenback against other currencies will reflect in the reporting value. Because of the dollar's appreciation this time, the value of other currencies has dropped. The RBI net bought $56.9 billion of foreign currencies from the market in fiscal 2015, acco ..

But foreign currency assets in its reserves rose only $39.8 billion between the last reporting Fridays of fiscal 2014 and 2015. This implies a valuation loss of $17.1 billion. The high level of revaluation may force the RBI to rework its foreign exchange management policy. "It will only mean that the RBI will have to keep buying dollars from the currency market more aggressively to neutralise this valuation impact," said SK Ghosh, chief economic adviser to State Bank of IndiaBSE 2.39 %. "Howe ..

Precise estimates vary because the exact impact depends on the time of purchase of various currencies and the prevailing value then. According to estimates by a leading investment bank, the numbers for fiscal 2015 were as follows. Spot interventions about $55 billion; valuation loss $15 billion and increase in foreign currency assets in reserves $40 billion.

The Economic Times