RBI announced in its Half Yearly Report on Management of Foreign Exchange Reserves which were $350.4 billion as on September 2015, were able to support imports for 9.8 months. Import cover was 8.1 per cent in September 2014.
- Foreign exchange reserves were at $350.4 billion as on January 1, 2016, the same level seen on September end.
- Aim: Curbing volatility in the currency market ahead of the crucial US Fed meet which eventually decided to increase interest rate for the first time almost in a decade – as expected by the market participants.
- Import cover: Indicator of the stability of the currency
Foreign exchanges reserves: Foreign currency assets (FCA), though there is also gold, special drawing rights and reserve tranche position in International Monetary Fund, in the basket.
- Earlier Facts: During the currency crisis of 2013, when foreign exchange reserves fell to around $275 billion, import cover dipped to around seven months. According to currency experts, eight to ten months of import cover is essential for the stability of the currency.
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