India’s forex reserves come off 5-month lows to hit $658 billion, snap 8-week losing streak: RBI data
- India's forex reserves rose for the first time in nine weeks after dropping by nearly $48.3 billion cumulatively in the last eight weeks.
India's foreign exchange (forex) reserves snapped its eight-week losing streak, increasing by $1.51 billion to hit $658.091 billion, coming off five-month lows. The Forex kitty rose for the first time in nine weeks after dropping by nearly $48.3 billion cumulatively in the last eight weeks. The overall reserves had dropped by $1.31 billion to $656.582 billion in the previous reporting week.
The kitty has witnessed a declining trend in the last two months and dropped by a record $17.761 billion in the week prior to the last. The forex reserves had increased to an all-time high of $704.885 billion at September's end. For the week ended November 29, foreign currency assets (FCA), a major component of the forex reserves, increased by $2.061 billion to $568.852 billion.
Changes in FCA are caused by the central bank's intervention in the forex market. The Reserve Bank of India (RBI) intervenes on both sides of the forex market to curb undue volatility in the rupee. Expressed in dollar terms, the FCA includes the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in foreign exchange reserves.
Gold reserves decreased by $595 million to $66.979 billion during the week. Special Drawing Rights (SDRs) were up by $22 million to $18.007 billion. The central bank data showed that India's reserve position with the International Monetary Fund (IMF) was up by $22 million to $4.254 billion in the reporting week. The forex reserves also include India's reserve tranche position in the IMF.
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The rupee has largely remained under pressure over the last two months due to heightened foreign portfolio outflows and a wave of dollar strength sparked by Donald Trump's victory in the US presidential election. Shaktikanta Das, the RBI governor, said on Friday that the central bank's "central tenet" is to maintain orderliness and stability in the exchange rate without compromising market efficiency.
"Forex reserves are deployed judiciously to mitigate undue volatility, maintain market confidence, anchor expectations and preserve overall financial stability," Das said, adding that the current level of reserves is “quite robust.”
Indian rupee settles flat, bond yield rises after RBI Policy
The rupee declined marginally against the dollar in the week to which the forex reserves data pertains. The local currency ended at 84.6875 on Friday and logged a fifth consecutive weekly fall, declining 0.2 per cent. It hit a record low of 84.7575 this week. Forex traders said an overall decline in the US dollar and crude oil prices supported the rupee. However, weak domestic markets capped sharp gains.
Indian government bond yields jumped, with the 10-year benchmark bond yield posting its biggest one-day rise in the last six months. The central bank maintained its policy rates while infusing liquidity, which was largely factored into bond prices. The benchmark 10-year yield ended at 6.7446 per cent, compared with its previous close of 6.6802 per cent. It posted its biggest rise since June 4.
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The RBI kept its key interest rate unchanged but cut banks' cash reserve ratio for the first time over four years, easing monetary conditions as economic growth slows. The cash reserve ratio was cut by 50 basis points to four per cent, effective in two tranches starting from December 14 and December 28. This was the first cut since March 2020 and the move will support the banking system.
Announcing the fifth bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said it had been decided to increase the interest rate ceilings on Foreign Currency Non-Resident Bank deposits or FCNR (B) deposits as per tenors. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.13 per cent at 105.85.
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Business NewsEconomyIndia’s forex reserves come off 5-month lows to hit $658 billion, snap 8-week losing streak: RBI data
First Published:6 Dec 2024, 06:12 PM IST
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