India’s forex reserves near 4-month low; declines $867 million to $593.037

India’s foreign exchange (forex) reserves fell for a second straight week and stood at a near four-month low of $593.037 billion as of September 15 – a decrease of $860 million from the previous week, Reserve Bank of India’s (RBI) data showed on Friday, September 22. In the previous reporting week, the overall reserves dropped $4.99 billion to $593.90 billion.

The reserves took a hit as the central bank deployed the kitty to defend the rupee amid pressures caused majorly by global developments since last year. The central bank intervenes in the spot and forwards markets to prevent runaway moves in the rupee.

Over the last few trading sessions, the RBI has been likely selling dollars via public sector banks to prevent the rupee from dropping to a record low, according to traders quoted in a report by news agency Reuters. In October 2021, the country’s reserves had touched an all-time high of $645 billion.

For the week ended September 15, the foreign currency assets, a major component of the reserves, decreased $511 million to $525.915 billion, according to the Weekly Statistical Supplement released by the RBI.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. Gold reserves were down $384 million to $44 billion, said the RBI. The Special Drawing Rights (SDRs) were up $32 million to $18.092 billion, said the central bank.

Foreign exchange reserves include India’s Reserve Tranche position in the International Monetary Fund (IMF). The country’s reserve position with the IMF was down $4 million to $5.03 billion in the reporting week.

For the week the forex reserves data pertains, the rupee had dropped marginally against the US dollar and traded in a range of 82.8225 and 83.1850. The rupee ended at 82.93 on Friday and halted a three-week losing streak.

The US dollar index reached 105.74, the highest in over six months, while the US 10-year Treasury yield climbed to 4.50 per cent, the highest since 2007, on expectations that the US Federal Reserve will hold rates higher for longer.