Mumbai: The Reserve Bank of India (RBI) has started cutting its forward positions and countering its impact by infusing durable rupee liquidity via open market operations (OMOs). The central bank's total net short dollar position in the forward book fell to $52.4 billion in April from a peak of $78 billion in February, latest data showed.
Most of the positions-72% of the total book-were in the three months to one year segment, with forwards of $37.7 billion, while forwards in up to three months stood at $14.7 billion. "The larger than expected OMOs which happened was because the RBI was expecting these forwards to mature and not be rolled over," said Kanika Pasricha, chief economic advisor at Union Bank of India. The RBI's spot interventions in the forex market entail changes in domestic liquidity conditions, which may require "sterilisation" of such interventions, said the central bank's annual report published on May 29.
Expectations of maturing of positions changed as system liquidity turned surplus from April. Economists are expecting short positions of up to one month to mature, from earlier expectations of rollovers.
"We can see that about $7.4 billion of positions are in the 'up to one month' tenure, and are due for maturity in May. My expectation is that the RBI will allow this $7.4 billion to mature next month," Pasricha said.
This, economists suggest, is the reason why the central bank continued to conduct OMOs, especially in May, despite surplus liquidity.
Most of the positions-72% of the total book-were in the three months to one year segment, with forwards of $37.7 billion, while forwards in up to three months stood at $14.7 billion. "The larger than expected OMOs which happened was because the RBI was expecting these forwards to mature and not be rolled over," said Kanika Pasricha, chief economic advisor at Union Bank of India. The RBI's spot interventions in the forex market entail changes in domestic liquidity conditions, which may require "sterilisation" of such interventions, said the central bank's annual report published on May 29.
Expectations of maturing of positions changed as system liquidity turned surplus from April. Economists are expecting short positions of up to one month to mature, from earlier expectations of rollovers.
"We can see that about $7.4 billion of positions are in the 'up to one month' tenure, and are due for maturity in May. My expectation is that the RBI will allow this $7.4 billion to mature next month," Pasricha said.
This, economists suggest, is the reason why the central bank continued to conduct OMOs, especially in May, despite surplus liquidity.
You may also like
Global airlines pile on India capacity as US-Europe traffic drops
Nirjala Ekadashi Mein Pani Ke Niyam: Should we drink water on Nirjala Ekadashi or not? Know what the rules say, see the time..
'Lacks maturity to handle post of LoP...': Sudhanshu Trivedi hits out at Rahul Gandhi over remarks in MP
Nainital: Not just Kainchi, Neem Karauli Baba has three more Dhams, know where and how they were built..
Public warned 'do not approach' Travis Decker after his young girls are found dead
