India’s central bank sells $ 20.1 billion to protect rupee in March – RBI Bulletin

The Reserve Bank of India sold .1 20.1 billion in spot foreign exchange markets in March to support the rupee against the US dollar, as shown in its monthly bulletin on Tuesday.

The central bank said its net outstanding forward dollar purchases stood at $ 65.79 billion at the end of March, up from $ 49.11 billion at the end of February. In February, the RBI sold net $ 771 million in the spot market.

In March, the rupee moved from Rs 75.76 to Rs 76.97.

In March, the rupee touched its first record low of the year, below 76.9050 per dollar, the last time it touched the COVID-19 epidemic on April 22, 2020.

The unit has hit multiple record lows in the past two weeks due to the broad strength of the dollar and serious risk aversion, reaching the previous day’s life low of 77.7975.

“Given the RBI’s adequate FX reserves, we expect the rupee to remain more stable and weaker against other EM (emerging market) currencies against the greenback over the next few years,” said Adam Hoyes, assistant economist at Capital Economics. Said in a note.

India’s foreign exchange reserves fell to 59 595.95 billion as of May 6, from $ 597.73 billion a week ago, according to the latest RBI data last week.
At the beginning of September 2021, reserves reached a record high of 2 642.45 billion.

The central bank further said in its bulletin that inflationary pressures are generalizing across the growing commodity group. It said the Monetary Policy Committee’s response to the rapid rate hike showed its firm commitment to price stability.

The MPC raised its core debt rate by 40 basis points at an unscheduled meeting on May 4, and most economists are expecting further increases at its next meeting.

The central bank wrote, “Weak global risks, weakening growth, high inflation, supply disruptions due to geopolitical spillovers, and volatile financial markets resulting from synchronized monetary austerity are short-term challenges.”

It said the recovery of the Indian economy has remained resilient, although risks arising from global growth have hampered momentum and rising international commodity prices have widened the country’s trade and current account deficits.

“To achieve higher growth on a sustainable basis, the government needs to encourage private investment through high capital expenditures that crowd out private investment,” the RBI said.

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