India’s forex reserves fell $2.06 billion after extending gains for eighth straight week

NEW DELHI: India’s foreign exchange reserves (forex) fell $2.06 billion to $686.06 billion in the week that ended on May 2, after extending gains for the eighth straight week, official data released by the Reserve Bank of India (RBI) this week showed.

India’s forex rose by $1.983 billion to $688.129 billion in the week that eneded on April 25. For the reporting week, the foreign currency assets increased $514 million to $581.177 billion, the apex bank’s data shows. The FCAs are the largest components of the foreign exchange reserves which reflects the valuation impact of non-US currencies like euro, pound, and yen kept in the reserves. They are written in the dollar terms.

The gold reserves also witnessed a hit, decreasing $2.545 million to $81.82 billion during the reporting week. The Special Drawing Rights (SDRs), which are kept with the International Monetary Fund (IMF) also saw a hit of $30 million, lowring at $18.558 billion, according to the RBI data.

The forex reserves started falling after reaching an all-time high of $704.89 billion in September, only to recover afterwards. The decline in reserves was most likely due to RBI intervention, aimed at preventing a sharp depreciation of the Rupee. The Indian Rupee is now at or near its all-time low against the US dollar.

An estimate by the apex bank suggests that India’s foreign exchange reserves are sufficient to cover approximately 10-12 months of projected imports. In 2023, India added around $58 billion to its foreign exchange reserves, contrasting with a cumulative decline of $71 billion in 2022.

In 2024, the reserves rose by a little over $20 billion. Foreign exchange reserves, or FX reserves, are assets held by a nation’s central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.

The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The Central bank strategically buys dollars when the Rupee is strong and sells when it weakens. (ANI)