MUMBAI: The Reserve Bank’s outstanding net short position in the forward book rose further to $77.5 billion by the end of January up from the $67.9 billion at the end of December, shows the monthly bulletin from the central bank, which also shows that, the RBI net sold $11.1 billion in January in the spot market, after a net sale of $15.1 billion in December.
On the other hand, the central bank had bought $49.1 billion, while selling $60.2 billion of foreign currency in January. The rupee depreciated by 1.16% in January. In January 2024, the RBI's net outstanding forward purchases were $9.974 billion.
This also had the rupee's REER (real effective exchange rate) dropping to 102.37 in February. However, the RBI was a net buyer of dollars in during April-September period, purchasing $8.52 billion. Of the $77 billion net short dollar position, $20.95 billion were in one-month contracts, $25.97 billion in one to three month tenures with a portion set to mature in March, and the remaining $30.60 billion spread across six-month and one-year tenures, shows the March bulletin.
A year ago, at the end of January 2024, the RBI's net outstanding forward purchases stood at a low $9.974 billion as the rupee was more or less stable. According to analysts, the short position rose because of the $5 billion dollar-rupee swap the RBI conducted, and would have taken new positions as the rupee was weakening in January.
The short positions must have increased further after the $10 billion swap, but we also saw some inflows into the debt segment, which should have neuteralised it. They also ruled out the forward shorts scaling the $100 billion-mark. There were outflows from equities in January, especially in the first half, which led to intervention by the RBI leading to the central bank taking the risk of higher short positions, said a dealer at a state-owned bank.
Meanwhile, the bulletin said the REER of rupee continues to moderate, falling to 102.37 in February, against 104.84 in January. The REER has increased from 103.66 in January 2024 to 108.14 in November 2024, before moderating to 107.20 in December 2024.The rupee depreciated by 2.4% (month-on-month) in terms of the 40-currency REER in February when it also had plumbed the lowest of 87.95 on February 10, due to the rupee pains in nominal effective terms and the narrowing of the country’s inflation differential with its major trading partners, the bulletin said.“
As of March 17, the dollar has given up all of its gains since mid-November 2024, weighed by US trade wars and growth uncertainties,” the bulletin said. Meanwhile during the current financial year up to November, the central bank net sold $36 billion and had net bought $1.9 billion in January 2024. In the previous financial year, the RBI net bought $41.27 billion.
The central bank said that it purchased $49.15 billion and sold $60.29 billion during the period, leading to net sale of $11.14 billion in the spot foreign exchange market in January. In December, it had sold a net of $15.15 billion in the spot market.