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Forex reserves touch new high at $48.01 billion

India's foreign exchange reserves stood at an all-time high of $48.012 billion for the week ending on December 21, shored up mainly by dollar inflows from expatriates, analysts and traders said on Saturday.

The reserves provided India with adequate armour to defend the rupee if required, they said.

The rupee has come under pressure in recent sessions with the spectre of war with neighbouring Pakistan looming.

Data released by the Reserve Bank of India on Saturday showed the reserves up $175 million from the previous week's $47.837 billion, entirely on account of a rise in the currency component of the reserves.

"The rise in the reserves has been very strong for the past three months mainly on account of the inflows from expatriates after the September 11 attacks on the United States," said Uday Mulgaonkar, associate vice president - currency strategy, at Kotak Mahindra Capital Company.

He said inflows from expatriates in the aftermath of the attacks were the main reason for the reserves rising by $3.3 billion in the last three months.

Inflows from foreign institutional investors and exporters have also helped, he added. After a spate of selling in September, FIIs started buying again.

Their net purchases since October amount to $267.2 million. Their purchases for 2001 so far are $2.83 billion.

The strong capital inflows have helped the Indian currency trade with a firm bias rising to a three-and-half month high of around 47.7650/7700 per dollar on December 19, before weakening again following the December 13 attack on the Indian Parliament which authorities blamed on Pakistan-based militants.

The rupee ended Friday at a new closing low of 48.26/27 as war clouds gathered with the nuclear-capable Indian and Pakistan beefing up forces on their common border and exchanging sporadic fire.

RESERVES GOOD ARMOUR

"The rise in the reserves is very encouraging and provides enough armoury to the central bank to protect the rupee if it needs to," Mulgaonkar said.

The rupee's fall has not been entirely on speculative inter-bank play.

Traders said there was genuine demand for dollars from corporate clients including importers who were covering dollar-exposures in case the situation at the border worsened.

The central bank has used its reserves in the past to meet dollar demand in the market, in some cases, directly selling dollars to some firms.

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