Forex Reserve

The current account balance recorded a deficit of $36.4 billion (4.4 per cent of GDP) in the second quarter, up from $18.2 billion (2.2 per cent of GDP) in the first. Underlying the current account deficit in the second quarter was the widening of the merchandise trade deficit to $83.5 billion from $63 billion in the first quarter of 2022-23.

Data released by the central bank showed that the foreign currency reserves held by the SBP were recorded at $6,714.9 million as on December 2, down $784 million compared to $7,825.7 on November 25, The News reported The foreign exchange reserves have fallen below the $7 billion level for the first time since January 2019, the report said.

According to a weekly supplement issued by the Reserve Bank of India (RBI), the overall reserves had dropped by $3.847 billion to $524.52 billion in the previous week. In October 2021, the country's foreign exchange reserves had touched $645 billion. However since then, the reserves have been falling.

"Even so, intervention by the RBI is likely to keep INR (Indian Rupee) in the range of 82.25-82.75/$ in the near-term. Fed minutes and US Q3CY22 GDP (gross domestic product) scheduled to be released later in the month will determine the course of the forex market," the report said.

The increase in crude prices hit the Indian rupee as the country meets bulk of its oil needs through imports. Further the Indian stock markets too fell on Monday. The Reserve Bank of India (RBI) does not have any fixed dollar: rupee exchange rate and its market interventions is to curb excessive volatility, Governor Shaktikanta Das said recently.

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At the interbank foreign exchange market, rupee ended at 79.75, as against 79.77 on the previous trading session. "In the last two days, the rupee consolidated in the range of 79.80 to 79.55. RBI's intervention and dollar inflows remain the main driver of the rupee's outperformance in the last few days," Dilip Parmar, Research Analyst, HDFC Securities, said.

"A mostly lacklustre day, as demand from oil marketing companies and supply from exporters balanced the market. Over this week, the market moving event will be Fed meeting, where the central bank is expected to hike by 75 bps and sound quite hawkish," said Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd.

At the interbank foreign exchange market, the rupee ended at 79.44, against 79.15 in the previous trading session, against US dollar. Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd, attributed the dip to the strong rally in US Dollar Index and sell-off in equities.

Experts though feel that it would be a tough task as current account deficit may further go up to more than 3 per cent of the GDP in the current financial year. Government, on its part, feels that with prices of global commodities like crude oil, fertilisers and gold among others falling, the current account deficit will gradually cool down.