Forex reserves down at $279.91-bn

India's foreign exchange reserves fell further to USD 279.91-billion for the week ended September 25 as compared to USD 280.77-billion in the previous week.

The foreign currency assets (FCA) declined to USD 263.498-billion, falling by USD 855-million, from USD 264.353-billion the week before, Reserve Bank said in its weekly report on Friday.

Foreign currency assets expressed in US dollar include the effect of appreciation or depreciation of non-US currencies (such as Euro, Sterling, Yen) held in reserves, the central bank said.

During the week, the gold reserves stood unchanged at USD 9.828-billion while Special Drawing Rights (SDRs) dropped marginally to USD 5.220-billion from USD 5.224-billion the week before, RBI said.

The country's reserves position in the International Monetary Fund stood at USD 1.364-billion during the period, RBI said.

Daily Forex Report - USD erases nfp gains in volatile trade, ECRI at record high

Overview
The USD traded mixed ahead of today's release of US unemployment with the USD supported by safe haven flows as global equity markets continued to decline, JPY supported by a statement from Japan's finance minister that JPY strength will not be distressed at this weekend's G-7 meeting in Istanbul, and commodity currencies pressured by concern that the global economic recovery will be slow. EUR traded higher supported by report of rising EU producer prices and ECB rate hike speculation. GBP drifted lower pressured by report of a decline in UK construction PMI with downside limited by report that UK house prices rose for the fifth month in a row. There was a lot of rhetoric ahead of the G-7 meeting with US Treasury Secretary Geithner stating that a strong USD is important to the US. Reuters reports that EU officials applaud US statements favoring a strong USD. Thursday Fed Chairman Bernanke said Bernanke's there is no immediate risk to USD reserve status and that a strong USD is very important to the US. Over the past few days EU officials have expressed concern about EUR strength versus the USD. French Finance Minister Legarde says that the USD will be discussed at this weekend's G-7 meeting. US September unemployment rate rose to its highest level in 26 years to 9.8%. September nonfarm payrolls declined by a larger than expected 263k. The largest jobs losses were in construction, manufacturing retail trade and government. Since the start of the recession in December 2007 the number of unemployed has increased to 15.1 mln. The USD extended early gains in reaction to the worse than expected nonfarm payrolls as the data generates concern about the potential strength of the US economic recovery. USD gains were limited by statement from Pimco's Gross that he believes the US wants a weaker USD. USD traded lower in reaction to the release of the Economic Cycle Research Institute (ECRI) inflation index which showed a sharp rise in September. The ECRI gauge hit an 11 month high. The ECRI says that US inflation is on the cusp of a cyclical upswing. The ECRI yearly growth rate hit a record high last week. The ECRI says US recovery is unlikely to falter anytime soon. August factory orders posted an unexpected decline. Today's USD price action is difficult to explain and as recovery doubts contribute to rising risk aversion. In the past the USD has benefited from risk aversion. Today's USD price action may be signaling a delinking form the correlation to risk sentiment.

Today's US data:
September unemployment rose to 9.8%. September nonfarm payrolls declined by 263k, a 180k decline was expected. August factory orders declined by 0.8%, a 0.7% rise was expected. This marked the first decline in factory orders since March. Today's US economic data suggests that the road to US economic recovery will be bumpy and recovery may be weak.