RBI Bought $5.8 Billion In April To Check Rupee’s Rise

The Reserve Bank of India (RBI) bought $5.8 billion from the market in April, which took net purchases to more than $25 billion since Raghuram Rajan took charge as RBI governor in September 2013.

The RBI is buying US dollar aggressively to check appreciation of the rupee and consolidate foreign exchange reserves, which decreased last year.

The rupee has gained 12% against the US dollar since September 4, 2013, when Rajan took charge. It had hit an all-time low of 68.85/$ in August, 2013.

In April 2014, foreign institutional investors sold Rs 9,200 crore in debt instruments while they invested Rs 9,600 crore. The rupee fell 45 paisa or 0.75% to 60.34/$ during the same period.

“The Reserve Bank of India may continue with the intervention strategy if the foreign portfolio inflows rise at the current pace,” said Soumya Kanti Ghosh, chief economic advisor and general manager of the State Bank of India. “The central bank is buying dollars in the spot market, but selling in the forward market to neutralise the liquidity impact,” she added.