Forex reserves fall by 295 mn

Analysts said the drop indicated dollar sales by the RBI through its surrogate the State Bank of India SBI to stem the rupee8217;s fall following the border tensions. quot;The fall in reserves confirm the dollar sales that week were at the RBI8217;s behest,quot; the chief dealer at a European bank said.

India shot down a Pakistani naval aircraft on August 10 accusing it of straying into its airspace. Pakistan responded by firing at Indian aircraft the next day.

Dealers said the central bank8217;sreserves were expected to fall further in the week to August 20 as the RBI sold more dollars during the week. The rupee ended on August 20 at a record closing low of 43.57 per dollar on fears of the US would hold back some loans in response to India8217;s announcement of a nuclear policy earlier in the week.

A day before India shot down the Pakistan naval aircraft, SBI8217;s dollar sales helped the rupee recover from intra-day lows of 43.585 as it came under pressure from a surge in corporate dollar demand. The central bank does not indicate reasons for the drop in reserves.

During the week to August 13, the rupee mostly traded in a weaker range and ended at 43.43 per dollar compared to the opening of 43.49. Dealers said a fall in reserves for the second straight week indicated that foreign fund flows into India were drying up.

Latest data from the Securities and Exchange Board of India shows foreign funds have sold 80.5 million worth of Indian equities and debt during August 1-20. Foreign funds have investedaround 1 billion in Indian markets between April- July 1999.

8220;The uncertainty over elections seem to be one reason for the fall in FII inflows. Another reason is that Sensex had already gone above the 4,500 level. Chances of further appreciation are less now. They would enter only when the market turns weak,8221; said an analyst.

Pak rupee comes under pressure

KARACHI: A spate of heavy foreign payments has been pulling down the value of the rupee recently and dealers and analysts said on Friday the pressure is likely to mount as a result of economic worries and a growing trade imbalance.

quot;The central bank has done a good job keeping the rupee range-bound between the 51 and 52 rupees to a dollar level but devaluation pressure is building,quot; said one foreign banker.

Bankers said the foreign exchange payments, mostly to shipping and airline services and portfolio investors, were delayed in June and July when the central bank slowed down the approval process to conserve cash reserves. All outwardtransactions over 10,000 need approval of the State Bank of Pakistan 8212; a process that usually takes a minimum of seven days though no time limit has been set. The rupee was trading at 51.79/51.83 rupees to a dollar in the interbank market in early trade on Friday, compared with 51.30/51.40 rupees at the start of the month. quot;Foreign outward remittances this week have been over 30 million,quot; said a treasury dealer at a foreign bank.