In the last couple of years, the Indian forex markets have noticed heightened activities and extreme volatilities on account of persisting weakness in the dollar. The burgeoning forex reserves crossing $116 bn mark, two digit GDP growth, growing current account surplus and continuous appreciation of the Indian rupee against the dollar have justified `India Shining' to a certain extent. The following article highlights some of the issues behind erratic movements taking place in the Indian forex markets and the role of the RBI to knob the prevailing trend in the markets.

The Indian forex market has witnessed a high degree of volatility in the past few months compared to the magnitude that the market has observed in the aftermath of the East Asian crises as well as the 9/11 terrorist attacks. The developments taking place in the Indian forex market have brightened the prospects for the Indian economy significantly in the current financial year. These circumstances have been supported by the upsurge in the forex kitty of the country touching the levels of US$ 116 bn as on April 09, 2004.

As a consequence, the Indian rupee has been appreciating steadily, which in turn has led to faster repatriation of export earnings and remittances by expatriates. The Indian currency hits a 4-year peak of 43.5425/5475 since January 17, 2000 before closing at 43.5450/5500 against dollar on April 07, 2004. The appreciation in the rupee rose to 4.7% for the calendar year 2004. The outcome for the current financial year is viewed with confidence in the industry following a sharp rise in the agricultural production as well as achievement of a two-digit GDP growth of 10.4% in the third quarter of the financial year 2003-04.

Indian, forex, have, current, dollar, financial, market, markets, rupee, April, growth, been, account, against, appreciation, place, following, taking, well, circumstances, closing, compared, confidence, consequence, continuous, country, couple, crises, crossing, currency