A customer holds hundred rupees Indian currency notes near a currency exchange stall in New Delhi.
| Photo Credit: REUTERS

The rupee slipped 2 paise to 83.42 against the US dollar in early trade on Thursday, May 30, tracking the outflow of foreign capital amid volatile domestic equity markets.

Forex traders said a strong American currency also weighed on the local unit even as retreating crude oil prices capped the rupee’s sharp fall.

At the interbank foreign exchange market, the local unit opened at 83.42 and slipped further to 83.44. It soon recovered to trade at 83.42 against the greenback, registering a loss of 2 paise from its previous closing level.

On Wednesday, the rupee plunged 22 paise to close at 83.40 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 105.10, higher 0.06 per cent.

Analysts attributed the higher dollar index to the rising US Treasury yield amid the hawkish stance of the US Federal Reserve.

Also, they said that market participants will closely monitor the US GDP data for the first quarter (second estimate), weekly job reports and pending home sales numbers to be released later in the day.

Brent crude futures, the global oil benchmark, fell 0.05 per cent to USD 83.56 per barrel.

On the domestic equity market, the 30-share BSE Sensex was trading 227.31 points, or 0.31 per cent lower at 74,275.59 points. The broader NSE Nifty fell 62.20 points or 0.27 per cent to 22,642.50 points in initial trade.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, selling shares worth ₹5,841.84 crore, according to exchange data.

India’s forex reserves have increased yet again, RBI data shows. This is the fifth consecutive week of a jump in the overall reserves.
| Photo Credit: Reuters

India’s forex reserves increased by $140 million to touch its all-time high of $642.631 billion during the week ended March 22, the Reserve Bank of India said.

This is the fifth consecutive week of a jump in the overall reserves. The kitty had increased by $6.396 billion to $642.492 billion in the previous reporting week.

The previous peak was recorded in September 2021, when the country’s foreign exchange reserves reached $642.453 billion. The reserves took a hit as the central bank deployed the kitty to defend the rupee amid pressures caused majorly by global developments since last year.

For the week ended March 22, the foreign currency assets, a major component of the reserves, decreased by $123 million to $568.264 billion, the data released on March 29 showed.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves up

Gold reserves increased by $347 million to $51.487 billion during the week, the RBI said.

The Special Drawing Rights (SDRs) were down by $57 million to $18.219 billion, the apex bank said. India’s reserve position with the IMF was also down by $27 million to $4.662 billion in the reporting week, the RBI data showed.

Pakistan’s Prime Minister Shehbaz Sharif.
| Photo Credit: AP

Taking a tough stance, India has batted for “stringent monitoring” of any emergency funds provided by the International Monetary Fund (IMF) to its financially beleaguered neighbour Pakistan, stressing that such funds must not be redeployed towards defence bills or repayment of loans from other countries.

India’s position was put across to the IMF’s executive board by its nominee, executive director Krishnamurthy Subramanian, during a recent review of an ongoing $3 billion short-term Stand-By Arrangement (SBA) granted to Pakistan by the Fund last July. India has usually abstained from voting on loans sought by Pakistan and did the same last July when the SBA was approved.

Stringent monitoring

In mid-January, when the board reviewed the loan, India’s representative abstained from voting again, following which the IMF released a $700 million tranche to Pakistan. However, this time, the Indian government requested Mr. Subramanian to convey to the IMF board the need to put in place “checks and balances and ensure a stringent monitoring” of Pakistan’s utilisation of IMF money.

“Such monitoring is imperative to ensure that funds received to meet development imperatives are not diverted towards defence spending and repayment of external debt owed to third countries,” India is learnt to have stressed to the IMF’s executive board. The IMF and Mr. Subramanian did not respond to queries from The Hindu till the time of going to press.

Seeking more funds

The development assumes significance as Pakistan’s newly formed government, led by Prime Minister Shehbaz Sharif, is pursuing “immediate talks” with the IMF to seek additional funding support, including the $1.2 billion residual balance under the SBA which expires next month, and beyond.

The IMF’s support had helped cash-strapped Pakistan stave off an imminent external payments crisis that it faced last June when forex reserves had dwindled to just $3.5 billion, barely enough to pay a month’s import bill. Pakistan’s economy — hit by severe floods in 2022, external shocks, and sharp inflation — had contracted in 2022-23. (Its financial year runs from July to June.)

Ahead of the elections, IMF staff had met representatives of Pakistan’s major political parties — the Pakistan Muslim League-Nawaz, Pakistan People’s Party, and Pakistan Tehreek Insaf — to seek confirmation of their support for its lending programme that mandates wide disclosures, deficit goals, and multiple reforms, such as a market-determined exchange rate for its Rupee and tighter anti-corruption steps.

Long-term financing plan

By February, Pakistan’s forex reserves had improved slightly to $8 billion, but were still only sufficient to cover six weeks of imports. After last month’s general election results, Moody’s Investors Service reckoned that Pakistan’s external financing needs will remain high till at least 2026-27, meaning that it will need a longer-term financing plan after its current SBA from the IMF ends.

“Overall, uncertainty around Pakistan’s ability to quickly negotiate a new IMF programme after the current one expires in April 2024 remains very high. Pakistan’s government liquidity and external vulnerability risks will remain very high until there is clarity on a credible longer-term financing plan,” the global ratings major had cautioned.

India’s forex reserves jumped by $2.975 billion to $619.072 billion for the week ended February 23, the Reserve Bank said on Friday.

In the previous reporting week, the overall reserves had dropped by $1.132 billion to $616.097 billion.

For the week ending February 23, the foreign currency assets, a major component of the reserves, increased by $2.405 billion to $548.188 billion.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-U.S. units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves increased by $472 million to $47.848 088 billion during the week, the RBI said.

The Special Drawing Rights (SDRs) were up by $89 million to $18.197 billion, the apex bank said.

India’s reserve position with the IMF was up by $9 million to $4.839 billion in the reporting week, the apex bank data showed.

India’s forex reserves hit an all-time high of $645 billion in October 2021.