RBI buying time to save FX reservesBusiness News

December 14, 2011 17:50
RBI buying time to save FX reserves

Business circles fear that the plunging value of the Indian rupee against the US dollar may push the double digit inflation even higher ultimately resulting in a severe balance-of-payments crisis unless the RBI steps in immediately and takes remedial measures.

Rupee value further went down today to the lowest of 53.64 per dollar and a sense of anxiety prevailing now over the balance of payments could give way to panic and distress if it reaches the level of 55.

The plummeting rupee is the result of limited options available with the RBI as it has only 6 per cent of its $314 billion reserves at its disposal to use and intervene in currency markets to bring the situation under control.

Market analysts say that the RBI is simply buying time before intervening and releasing more of the dollar reserves to be available in the currency markets just with a view of conserving the valuable FX.

Once it intervenes to set right the situation, the RBI may also opt to indulge in rupee buying spree to bring the Indian currency’s value to normal level. (JUBS)

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