India’s forex reserves hit a new high at $333 billion for the week ended 13 Feb 2015. This is the highest ever in terms of forex reserves that India’s held. Including known forex forward derivative exposure, we are at about $340 bn in the kitty. What’s Different About This? Forwards have been Unwound. While this sounds like the RBI is purchasing dollars like crazy, this might have been the “unwinding of forward contracts”. RBI buys both in the cash market (and owns dollars outright, which reflects in the forex reserves) and in the forward market (where a buy will receive dollars at a future date, so it will be an “outstanding” buy). When that future date comes, the RBI can choose to buy the dollars and add to forex reserves, or roll it over to other forward contracts. The former – to end a contract and buy the dollars – results in increased forex reserves and lower outstanding forwards.… (Read On…)
[via Capital Mind]
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