MUMBAI: The Reserve Bank of India’s investment in US Treasury bonds plunged by a record $21 billion in March as the central bank likely aimed to increase its dollar reserves amid global uncertainties.
During the month, it slumped perhaps at the fastest pace with Mint Street’s holdings now at $156.5 billion.
The pandemic is primarily blamed for the same as central banks worldwide chose to shore up their dollar stocks.
“Lower holdings may be attributed to the RBI moving to holding dollars in an uncertain environment pre-shutdown as well as sell dollars in market to steady the rupee,” said Madan Sabnavis, chief eco nomist at CARE Ratings. FPI were negative and RBI would have preferred to hold dollars and sell in market to ease conditions.”
India is now 13th largest investor in US Treasury bonds after Saudi Arabia. Japan and China remain top two sovereign investors. In February, RBI’s investment was at $177.5.
Foreign holdings in the world’s most liquid sovereign securities dropped by the most this century as coronavirus-related global investor apprehension sent US debt yields tanking to record lows, Bloomberg reported.
India’s foreign exchange reserves rose by $4.235 billion to $485.313 billion, just short of the last life-time high, in the week to May 8. The rupee has been hitting new record low levels in March and April falling just shy of the crucial 77 a dollar mark.
India’s central bank uses its dollar reserves to stem any sudden rupee’s loss against the dollar in the currency market.
“It is not specific to India, but prevailing condition in many countries,” said Soumyajit Niyogi, associate director at India Ratings and Research. It is happening at a time when global trade dynamics are facing natural and political headwinds.”
Total foreign ownership of treasuries decreased by $256.6 billion to $6.8 trillion, show data from the US government. This is said to be the biggest fall since early 2000.
New Delhi imposed a nationwide lockdown from March 24 this year, which was aimed at preventing wild spread of the pandemic COVID19. This in turn, triggered an economic crisis with chocking business volumes.
