Forex reserves were back on the downside in the latest week that ended on March 10. India's reserves have hit a 3-months low in the week under review to $560 billion. All components of reserves have fallen.
As per RBI's latest report, India's reserves stood at $560.003 billion in the week ending March 10th, down by $2.397 billion.
In the previous week which ended on March 3rd, reserves halted four consecutive weeks of losing streak to rise by $1.458 billion to $562.40 billion.
However, the latest reading of reserves near $560 billion would be the lowest since early December last year.
Furthermore, foreign currency assets (FCA) which is the largest component in forex reserves, dropped by $2.224 billion to $494.863 billion in the March 10th week ending. While in the previous week, FCA had climbed by $1.181 billion.
Meanwhile, gold reserves dipped by $110 million to $41.923 billion in the week ending March 10. Also, SDRs plunged by $53 million to $18.121 billion. Lastly, the reserve position at the IMF fell by merely $11 million to $5.096 billion in the latest week.
The total reserves were at an all-time high of $645 billion in October 2021. To tame rupee depreciation, RBI has been intervening in the forex market via both spot and forward positions.
On Friday, at the interbank forex market, the rupee strengthened against the US dollar as market sentiments improved after liquidity rescue in some of the US and European banks. The local unit closed at 82.5525 against the greenback compared to the previous print of 82.73 per dollar. For the entire week, the rupee however has depreciated by around 0.6%.
On rupee, Anindya Banerjee, VP - Currency Derivatives & Interest Rate Derivatives at Kotak Securities said, “USDINR spot closed 17 paise lower at 82.55, thanks to a risk-on rally in global markets after the rescue of First Republic bank in the US.”
Over the next week, Banerjee added, "the focus will be on the US Fed meeting, where they are expected to hike rates by 25 bps. As a result, we can expect high volatility in USDINR. We expect a range of 82.10 and 82.90 on the spot."
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