MUMBAI, OCT 19: The foreign exchange reserves position of the country which was marginally reduced by the Reserve Bank of India's (RBI) intervention in the forex market to strengthen the rupee has limped back to satisfactory levels.According to the RBI data released here, the foreign currency reserves of the country as on October 10, 1997 have once again crossed the $ 26 billion market to touch $ 26.11 billion. The foreign currency reserves have actually gone up by US $ 0.3 billion within a week. The total forex reserves, including foreign currency assets, $ 3.70 billion worth gold and special drawing rights (SDR), have now gone up to $ 29.8 billion.While gold and SDR reserves remained constant during the week, the foreign currency assets had gone up from US $ 25,758 million following purchases of dollars by the RBI in the last a few days. Apart from RBI purchases, foreign institutional investors have also brought in dollars in the last one month. Market sources expect further rise in dollar inflows as GAIL and MTNL are getting ready to launch their GDR issues worth over $ 1,000 million.After the South East Asian currency crisis and the speculative activity in the Indian forex market, the Indian rupee was weakening. This was precipitated by the Prime Minister's statement that the rupee will be allowed to float freely within a band had caused confusion in the forex market with speculators and corporate buyers entering the market in a big way to get future cover for the rupee.In order to prevent further fall in the rupee value, which is a politically sensitive issue in the backdrop of the Asian currency crisis, the RBI had pumped in dollars (the central bank uses its forex reserves to balance the rupee-dollar level) from the forex reserves and the reserve position was marginally affected.However, the week's trend shows that the position is comfortable now. The rupee, in the meantime, strengthened last week and closed at Rs 36.19 per dollar on Friday. The rupee had actually fallen from Rs 35.75 level to Rs 36.60 on August 25 and the RBI intervened to sell dollars in the forex market for the first time in 18 months.The RBI's huge dollar purchases in the last fiscal led to a 4.7 per cent rise in the trade-based real effective exchange rate (REER). The appreciation in REER between 1993 and 1997 is as high as 9.6 per cent.The steady appreciation in REER, according to RBI, "points to the fact that attaining exchange rate objectives in the context of large capital inflows necessitates the maintenance of a delicate balance between the need to maintain the required rate of growth in exports and price stability."
