Amidst $ 307 m worth of Govt. securities outflow CB says no impact on rupee

Tuesday, 22 July 2014 00:48 - - {{hitsCtrl.values.hits}}

Reuters: Offshore investors sold Rs. 40 billion ($ 307.13 million) worth of Government securities last week, official data showed on Monday, but the Central Bank said this would not affect the rupee. The total foreign holding in Government securities in the week ended on 11 July stood at 509.59 billion rupees, of which foreign investors sold 7.9%, official data showed. The sudden outflow reduced the foreign holding in total outstanding Government securities to less than the 12.5% threshold set by the central bank. “It won’t have any impact on the rupee,” Central Bank Governor Ajith Nivard Cabraal told Reuters. There was no downward pressure on the currency due to the huge outflow, many currency dealers told Reuters. The rupee, which hit a more-than-one-year high last week, has been on an uptrend since late February in the absence of strong demand for imports and private sector credit. The Central Bank has absorbed around $750 million this year through 14 July to prevent a sharp appreciation in the currency. Foreign holdings of Government securities rose 20% last year to Rs. 477.4 billion. While the Central Bank has allowed some flexibility on the foreign holding threshold during the year, by the year end it has to fall within the 12.5% level. It had allowed foreigners to invest up to 13.1% of the total outstanding Government securities before last week’s outflow.

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