Friday, November 23, 2007

Where are the dollars ?

The RBI has been furiously buying dollars to stem the rise of the rupee. It has bought over 84 Billion since Jan 2007. Where are these dollars going ?
From the historical data from US treasury India had about 15 Billion US dollars invested in US treasuries. The latest data shows that India is not even on the list. So it has less that 11 billion dollars of US treasuries.
So where are the dollars going ? Is RBI buying other countries treasuries and thus insulating itself from any weakening of the dollar ? If RBI is doing that, hats off to it. It is passing on the role of managing the dollar depreciation to other central banks, while keeping the rupee from appreciating.

2 comments:

Nitin said...

Hi,

The dollar assets that RBI holds might not be limited to US treasuries. I'm not sure of this though.

But I'd expect them to have cut down on their dollar-denominated reserves over the last few months.

My friends tell me that the RBI is run by some very astute people, and the country's 'gold' is in safe hands.

barbadkatte said...

Nitin
If it is not US treasuries, RBI could invest in Agency bonds or Corporate bonds. Corporate bonds are risky, and it is unlikely that RBI would have invested in it. I hope RBI has not invested in Agency bonds ( the Freddie Macs & Fannie Maes of the world).