India’s forex kitty falls from USD 2.39 billion to USD 560 billion: RBI
The country’s foreign exchange reserves fell by US$2.39 billion to a three-month low of US$560.003 billion for the week to March 10, the Reserve Bank said in its latest weekly data release.
In the week to March 3, reserves rose by $1.46 billion to $562.40 billion.
On an annualized basis, RBI said, reserves fell by USD 47.31 billion during the week under review while on a fiscal year-on-year basis, the same declined by USD 62.23 billion.
With this erosion, the forex kitty is the lowest since early December, according to the weekly statistical supplement released by the RBI on Friday.
The loss in reserves was due to revaluation of foreign currency assets, the largest component of the forex kitty, to USD 494.86 billion from USD 2.2 billion in the week to March 10.
On a year-on-year basis, foreign currency assets depreciated by US$ 45.86 billion and on a fiscal year-on-year basis, they suffered a loss of US$ 59.49 billion.
Expressed in dollar terms, foreign currency assets include the effect of appreciation or depreciation of non-US units such as the euro, pound and yen held in foreign exchange reserves.
The reserve losses were mainly due to the RBI’s selling of dollars in the spot and forwards markets to hedge the rupee’s volatility to prevent exchange rate volatility.
Last week, the rupee stood firm and lost only 10 basis points against the dollar with the currency trading in a range of 81.61-82.29. On Friday, the rupee ended at 82.55.
The country’s gold reserves and SDR holdings also witnessed declines in the week under review with both reserves declining by USD 110 million and USD 53 million respectively. Gold reserves and SDR holdings are USD 41.92 billion and USD 18.12 billion respectively.
The country’s reserve position at the IMF also fell by USD 11 million to USD 5.1 billion.
Foreign exchange reserves are falling from a peak as the rupee is under pressure and the monetary authority is taking steps to protect the rupee from extreme volatility. In 2022, the cost of defending against a falling rupee exceeded US$115 billion in reserves.
The worst decline occurred in the week of February 10 when reserves fell from USD 8.32 billion to USD 566.95 billion.
In October 2021, the forex kitty reached an all-time high of USD 645 billion.
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