RBI may have purchased $8 billion from the market in less than a month, boosting foreign currency reserves and rupee liquidity.

The Reserve Bank of India is estimated to have bought more than $8 billion from the market in less than a month, simultaneously boosting the foreign-currency stockpile and enhancing rupee liquidity by as much as Rs 67,000 crore since the Diwali week.

India’s foreign-exchange reserves, which declined about $100 billion since October last year, have begun climbing over the past few weeks. Reserves rose at their fastest pace in more than 14 months for the October 28 weekend. Indications are that after some contraction in the next seven days, they have risen again in the week to November 11.

"In recent weeks, as the US dollar has lost momentum, the RBI is gaining reserves, primarily from revaluation gains and perhaps also some opportunistic buying," said Rahul Bajoria, MD and Head of EM Asia (ex-China) Economics, Barclays. "This, along with slowing imports, will allay fears of deteriorating import cover ratios. "

With an addition of another Rs 32,000 crore in base money since November 4 by way of net foreign exchange assets of the RBI, foreign exchange absorption by the central bank over the past four weeks could exceed $8 billion.

Regards,

Siddhant Bisht