Forex reserves shrink $402 mn as major currencies turn volatile.

MUMBAI: Foreign exchange reserves dipped $402 million during the week ended August 7, largely due to revaluation of non-dollar assets in reserves.

According to the latest data released by the Reserve Bank of India (RBI) in its weekly statistical supplement (WSS), total foreign exchange reserves, including gold and special drawing rights (SDR) — currency with the International Monetary Fund — dipped $402 million to touch $271 billion during the week ended August 7. The dip in reserves was on account of the fall in foreign currency assets, which declined to $412 million, while the reserves with IMF rose $10 million.

“So far this year, the dip in reserves has been largely due to the cross-currency revaluation, as the dollar (the currency in which the reserves are accounted) has been volatile against major global currencies,” said an economist with a brokerage firm, speaking on condition of anonymity.

Almost 40% of the reserves are believed to be comprised in non-dollar assets, including the sterling pound, yen, euro and the yuan, though no central bank makes its currency composition of reserves public. In such a situation, it is estimated that a sizeable portion of the rise in reserves, during the week, has been on account of revaluation.

As per the updated money supply figures, the total stock of money comprising cash currency and deposits in the system amounted to Rs 50,23,740 crore as on July 31, up Rs 51,722 crore (1%) over the previous fortnight’s levels. While currency with the public dipped Rs 10,098 crore, demand and term deposits rose Rs 33,153 crore and Rs 28,502 crore, respectively, during the fortnight. The annual money supply growth now stands at 20% is marginally higher than previous year’s 19.9%.

In other developments, both the Centre and state governments have kept their ways and means advances (WMA) vacant during the week ended August 7. WMA is a facility under which the governments (states as well as the Centre) can borrow from the central bank to meets their daily revenue mismatches. While borrowings within the limit are at the prevailing repo rate, borrowings above the agreed limit (between the government and RBI) are at 2% higher than the repo rate.