RBI's net forward book in dollars drop by $65.55 bln to $241 mn in Oct from Mar 2022
3 min read 20 Dec 2022, 07:52 PM ISTCompared to the previous month, the decline is by a whopping $10.182 billion in October. Notably, RBI's net forward book has nosedived by $65.55 billion from March 2022 levels.
PremiumRBI's outstanding net forward position in US dollars drastically dropped to $241 million by end of October 2022. Compared to the previous month, the decline is by a whopping $10.182 billion in October. Notably, RBI's net forward book has nosedived by $65.55 billion from March 2022 levels. So far this year, the central bank has been intervening significantly in the foreign exchange market to limit the weakening of the Indian rupee. The consistent drop in the net forward book can be attributed to RBI taking delivery of its maturing forward positions alongside shoring up its spot dollar reserves.
As per RBI's December 2022 bulletin, the central bank's outstanding forward position in the US dollar stood at a net of $241 million in October. In the previous month, RBI's net forward purchases stood at $10.423 billion.
Compared to October last year, RBI's net forward purchases have declined by a massive $48.865 billion in the month under review.
As of March 31, 2022, the net forward purchases stood at $65.791 billion. From this level, the net forward book has nosedived by $65.55 billion as of now.
RBI's bulletin said, the central bank sold $25.777 billion and purchased $24.855 billion -- taking its outstanding forward net forward sales to $922 million in October.
In terms of maturities, the data revealed RBI's forward book was at $5.135 billion for more than 1-year maturity period compared to $10.135 billion in September month. That being said, RBI's long position over 1-year maturity period has dropped by $ 5 billion in a month. There was no short position.
Further, RBI's position in up to 1-month maturity stood at (-)$10.677 billion in October versus (-)$9.586 billion in September. Its position in a maturity period of more than 1 month and up to 3 months stood at (-)$1.777 billion versus $4.928 billion in September, and lastly, the central bank's forward book stood at $7.560 billion in October for the maturities of more than 3 months and up to 1 year as against $4.946 billion in September.
Notably, in the futures segment, RBI's net futures dollar sales came in at $855 million.
In the foreign exchange market, this year, RBI has frequently intervened to protect the slippery of the Indian rupee which has weakened significantly against the US dollar. The central bank has carried out activities in both the forwards and the futures segments alongside major interventions through dollar sales in the spot market.
Generally, the central bank buys and sells American currency through forward contracts. Selling dollars for a future date is referred to as short dollar positions under RBI's forward contracts, on the other hand, buying dollars is said as long dollar positions in the contracts.
Further, in the December bulletin, RBI said, the size of forex
reserves is comfortable and has also increased. It has gone up from $524.5 billion on October 21, 2022, to $ 561.2 billion as on December 2, 2022, covering around nine months of projected imports for 2022-23.
Also, reserves have increased by $ 31.4 billion since the end of September 2022, as per RBI.
In regards to the rupee, RBI's bulletin said, the appreciation of the US dollar this year, which precipitated large-scale depreciation of all major global currencies including the Indian rupee (INR), has drawn wide attention. It is important to make an objective assessment of the movement of the INR in the context of global and domestic macroeconomic and financial market developments. Through this episode of US dollar appreciation, the INR’s movements have been the least disruptive, relative to peers.
In fact, the bulletin said, the bulletin said, "INR has appreciated against all other major currencies except a few."
On a financial year basis which is from April 2022 to October 2022, RBI's bulletin pointed out that the rupee has appreciated by 3.2% in real terms even as several major currencies have depreciated.
In November as well, the bulletin revealed that the rupee has appreciated by 0.6% amidst the weakening of the US dollar, softening crude oil prices, and net FPI inflows. Hence, the INR appreciation was modest compared to most of the other EME currencies.
On Monday, the rupee weakened to 82.7550 against the US dollar compared to the previous day's print of 82.7050 per dollar. During the day, the rupee dropped to touch 82.8850, however, shied away from crossing the 83 mark.
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