India’s forex reserves fall for the fourth week in a row

Mumbai: India’s foreign exchange (forex) reserves on Friday recorded a weekly fall for the fourth time in a row at a time when rupee has been under pressure against the dollar.

The Reserve Bank of India (RBI) data showed forex reserves fell $1.2 billion on-week to $417.7 billion as on 11 May.

Forex reserves have been falling after reaching an all-time high of $426 billion on 13 April 2018.

Currency dealers are attributing the fall in foreign exchange reserve to RBI’s dollar sales.

The central bank’s stated stance has been that it intervenes in the foreign exchange market to only curb excessive volatility. “RBI’s intervention in the forex market to curb further depreciation in the rupee has led to a fall in forex reserves. But there is also the impact of the revaluation of foreign currency assets which are part of reserves,” said Sajal Gupta, head, forex and rates, at Edelweiss Securities Ltd.

On Friday, the rupee ended at 68.01 against the US dollar, down 0.45% from its previous close of 67.70. Earlier this week, it had weakened past the 68-mark for the first time since January 2017.

The recent depreciation in the rupee has intensified mainly because of a sharp rise in international crude oil prices, which can potentially weaken India’s macroeconomic fundamentals. This is because India is net crude oil importer and a rise in prices can affect the import bill.

Brent crude has topped $80 a barrel for the first time since 2014.

The rupee along with other Asian currencies is under pressure of strength in dollar globally.

A weak rupee along with fears of political instability, following the recently concluded Karnataka elections, is contributing to foreign outflow from local equity and bond markets, dealers said.

So far this year, the rupee has weakened over 6%, while foreign investors have bought $660.20 million and sold $3.47 billion in equity and debt markets, respectively.