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RBI Sells $4bn in Sep 2013, Despite Big Currency Inflows



We note from the RBI Monthly Bulletin, that it has continued its selling spree on the dollar, selling a more than $6.9bn (gross) through the month of September. Remember this is the month Rajan introduced the FCNR swap, where dollars were bought from banks who brought in FNCR deposits with a fixed term fixed rate dollar-rupee swap.

Rbi Trades the dollar

RBI bought $3.37 billion (most likely through the FCNR swap) and sold $6.92 billion in October.

The RBI also sold another $500 million of dollar forwards (i.e. sell now, settle later), taking the total forward exposure to $9.58 billion (sold forward, remaining to be delivered).

Imagine this: RBI bought dollars as part of the FCNR swap. It sells those dollars to oil marketing companies as part of the OMC swap. It sells more dollars in the open market. It also sells dollars to banks on a forward basis. This is ludicrously confusing.

RBI needs to come clean with data. We need to see figures of:

  • How much have they given in the FNCR swap? (weekly data)
  • How much do they have as exposure to oil companies in the OMC swap? (weekly summary, including in time buckets of swap unwinding – upto 3 months, 3 months to 1 year, more than 1 year etc.)
  • How much are they selling in the markets? This should not be allowed at all. RBI should not sell in the markets directly. If anything, they should call for an “open market operation” where they sell or buy dollars, on a daily or weekly basis – but direct participation is very disturbing.

What we know is that in September, when the dollar fell sharply from the 68 levels to close at 62, the RBI was selling dollars big time. How sustainable is that?


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