What global factors influence India's forex reserve levels? | In Focus podcast
In Focus by The Hindu
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What Is the Valuation Impact of the Change in FX Rate?
When the value of dollar changes, which means let us say dollar appreciates or depreciates, what you do is from a reporting standpoint. Appreciation in dollar leads to a negative valuation impact on the reserve book. A depreciation ofdollar leads to a positive valuation impact or accounting impact in my reserves. It is not just FX root, it is the movement in interest rates also which causes valuation impact. The sovereign securities that you hold away says these are sovereign securities and every security has an yield. And when interest rates move up, which means that the bond prices move up or down, the yield also changes.
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