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Forex reserves dip $139 m after eight-month rise

Our Bureau

MUMBAI, May 25

THE country's forex reserves have dipped by $139 million for the first time in eight months and now stand at $ 55.573 billion for the week ended May 17, 2002 from $55.712 billion in the previous week, according to the weekly figures released by the Reserve Bank of India.

The last time the reserves registered a fall was in the week ended September 21, 2001.

Analysts see various reasons for the drop in reserves. Most forex dealers and analysts attribute the decline in the reserves to RBI intervention in the market to stabilise a volatile rupee on account of escalating apprehensions of war.

"Dollar inflows are drying up on account of depressed FIIs sentiment in the equities market so the apex bank has been supporting the currency through dollar sales by nationalised banks'', said a forex dealer with a private sector bank.

Another reason for the decline in reserves could be on account of revaluation in the RBI's basket of currencies. "The US dollar has been weaker against international currencies over the past week and since the apex bank holds a chunk of its reserves in dollars, it could have had some impact, '' said an analyst.

Some market men, however, attribute the fall in reserves to outflow of foreign exchange on account of possible defence purchase.

Sentiment in the forex market has been bogged down due to tensions on the border and also the threat of a sovereign downgrade by international credit rating agency, Standard and Poor's, said dealers.

However, towards the end of the week, statements issued by the Prime Minister led to war fears abating to some extent and the market is expected to stabilise if there are no other external triggers.

While the Indian currency has been range-bound for most of the week, forward premia has been on an upward trend for the past couple of weeks. However, forwards ended the week on a softer note with the six month premium ending at 6.25 per cent (it closed at 6.48 per cent on Monday) and the premium for one year ending slightly higher at 5.89 per cent (as compared to 5.79 on Monday).

Meanwhile, according to the W.S.S, the country's foreign currency assets also declined by $ 136 million to touch $ 52.433 billion , for the week ended May 17,2002.

Gold reserves remained steady at $ 3.131 billion while special drawing rights (SDRs) declined by $ 3 million and was at $ 9 million for the week ended May 17, 2002.

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