MUMBAI, June 22 (Reuters) – The Reserve Bank of India sold a net $8.94 billion in the foreign exchange market in April, data released on Monday showed, while its gold holding remained stable.
The RBI said in its monthly bulletin that it purchased $16.23 billion and sold $25.17 billion in April. In March, the central bank had sold a net $9.8 billion.The Indian rupee slumped to a record low of 96.96 per dollar last month, pummeled by surging oil prices and higher global bond yields. The currency was then shored up by firm RBI intervention over multiple trading sessions amid the U.S.-Iran war.
The RBI’s net outstanding forward dollar sales stood at $95.30 billion as of end-April, compared with $103.06 billion as of end-March.
The volume of the central bank’s gold holdings, meanwhile, remained unchanged during May at 880.52 metric tonnes, though its value declined to $112.6 billion from $120.23 billion in late April, the data showed. The central bank had rebutted media reports from earlier this month that suggested it sold part of its gold reserves.
The backdrop for the rupee has improved following a salvo of policy measures announced earlier this month to shore up dollar inflows as well as a sharp retreat in oil prices on signs of progress in U.S.-Iran negotiations.
On Monday, the rupee closed down 0.4% at 94.6775 per dollar. Latest data show that India’s foreign exchange reserves declined to a more than one-year low of $671.6 billion, reflecting the central bank’s efforts to defend the embattled currency.
STATE OF THE ECONOMY
The RBI bulletin said high-frequency indicators in April and May suggested sustained economic momentum, despite pressures from rising oil prices and supply disruptions due to the war in the Middle East.
The central bank has forecast the economy to grow by 6.6% in the current financial year.
India’s external sector also remained resilient, supported by foreign direct investment and adequate foreign exchange reserves.
Higher oil prices and the likelihood of a weak monsoon are expected to push up inflation. The RBI said despite a pickup in May, retail inflation remains anchored.
“An adverse south-west monsoon, if materialised, may weigh on the domestic growth-inflation outlook,” it added.Consumer price inflation in April was just under the central bank’s 4% target, but is seen rising to average 5.1% in the current financial year.
