India moves reserves to euros

Story link: India moves reserves to euros

Speculation is high that India may be seeking to reduce its reliance on the dollar in its foreign exchange reserves.

Another indication that this might be so came Tuesday in a written answer to a question about India’s exposure to the dollar from India’s junior finance minister.

In that answer, he referred to “diversification of currency risk.” His written comments also called the euro an important currency to the Reserve Bank of India, which some analysts believe signals that India is looking to switch to the euro in order to reduce the nation’s exposure to the dollar.

India’s reserves are known to have grown by $13.5 billion, to $142.6 billion since January. This is the sixth largest reserve in the world.

India does not reveal the makeup of its reserves, but analysts believe that India’s central bank reserves are currently about two-thirds dollars.

According to March statement by the Bank for International Settlements, that India’s banking sector, including both commercial banks and the Reserve Bank of India , held only 43 percent of its deposits in dollars in September 2004, compared to 68 percent in September 2001.