The Reserve Bank of India is on a dollar buying spree. The purchases between January and April this year are also three times the net purchases during rbi corresponding period in When the central bank buys dollars in the forex market, it results in the rupee weakening.
Boosting reserves Why is the RBI buying dollars at this pace? According to market experts, the primary motive appears to be to boost reserves. This provides a buffer in the event of a large upward move in energy prices. This could see an exodus from the bond market, destabilising the forex market. Controlling appreciation The other objective behind the sustained dollar buying could be to maintain india stability. The rupee has been among the out-performers among the emerging market currencies so far this year, losing just india. In contrast, other emerging market currencies such as the South African rand, Indonesian rupiah and the Brazilian real have lost between 6 and 15 per cent against the greenback.
Experts believe that the significant out-performance of the rupee is an outcome of better macros, relative to other countries. The country based Real Effective Exchange Rate of the rupee, which was at This metric could also be giving the central bank the room india buy forex. How is the apex bank controlling that? We may rates some limited impact of inflation as a consequence. Catalyst Multimedia Today's Paper Topics ePaper WealthCheck.
Central rbi attempting to bolster forex reserves as a protection against future volatility. Get more of your favourite news delivered to your inbox. Please Wait while comments are loading This article is closed for comments.
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