Indian foreign exchange reserves hit new high

India's foreign exchange reserves soared to a record $116.06 billion in the week ended April 9 as capital inflows gathered pace and the central bank stepped up its presence in the currency market, analysts said.
Data from the central bank, said India's foreign exchange reserves rose by $3.37 billion one of its highest weekly gains from $112.690 billion in the week ended April 2.
The Reserve Bank of India (RBI) said the foreign currency assets expressed in US dollar terms included the effect of appreciation/depreciation of other currencies held in its reserves such as the euro, pound sterling and yen.
Analysts said the rapid reserve accumulation largely reflects the central bank's determination to stem sharp gains by the local currency against the US dollar to protect export competitiveness.
The Reserve Bank of India has stepped up its dollar buying, after arming itself in the new fiscal year from April 1 with stabilisation bonds to offset the effects of its currency market intervention.
The new securities will be sold in the market to drain the rupees injected by the bank's dollar purchases. India plans to sell up to 600 billion rupees ($13.67 billion) of the bonds in the current financial year to March 2005.
The Indian central bank, which has been grappling with steady foreign capital inflows in the past two years, had almost run out of rupee assets to offset the inflows towards the latter half of March.
Analysts say this might have prompted the central bank to stay away from the currency market during that period allowing the tightly policed rupee to gain about 3.6 percent to hit multi-year highs.
"The intervention was expected after the market stabilisation bonds came into the picture in the new financial year," said Dhananjay Singh, economist with ICICI Bank.
The rupee ended on Friday at 43.8850/8950 per dollar, down half a percent during the week as the central bank soaked up foreign capital inflows.
But the partially convertible Indian rupee has gained about four percent against the dollar since January on robust foreign investments in one of the world's fastest growing economies.