India’s forex reserves drop for third week in row, at 11-week low of $561.27 bn
- In the previous week that ended February 10, reserves registered the biggest weekly drop in more than 11 months by $8.319 billion to $566.948 billion.
- The last time, forex reserves were up was in the week that ended on January 27, 2023.
India's forex reserves have declined for the third week in a row. In the week ending February 17, reserves are down by $5.681 billion, hitting an eleven-week low of $561.267 billion. All the component of forex reserves has contracted in the week under review.
In the previous week that ended February 10, reserves registered the biggest weekly drop in more than 11 months by $8.319 billion to $566.948 billion.
The last time, forex reserves were up was in the week that ended on January 27, 2023. On this day, reserves soared by $3,034 billion to $576.761 billion.
As per RBI's weekly statistical data, in the week ending February 17, foreign currency assets dipped by $4.515 billion to $496.072 billion. While gold reserves tumbled by $1.045 billion to $41,817 billion.
Also, SDRs fell by $87 million to $18.267 billion in the latest week, while the reserve position in the IMF dipped by $34 million to 5,111 billion.
Notably, the country's reserves were at an all-time high of $645 billion in October 2021. However, to tame rupee depreciation, RBI has been intervening in the forex market via both spot and forward positions.
On Friday, the Indian rupee stood broadly flat to end at 82.75 per dollar compared to the previous. Overall, the rupee closed the current week with a marginal upside compared to last week's Friday closing of 82.83 per dollar.
In the minutes of the MPC meeting for February 2023 monetary policy, RBI governor Shaktikanta Das said, "in a world of extreme uncertainty, India is witnessing a conducive environment of macroeconomic stability: the economy remains resilient; inflation has moderated in the past two months to below 6%; fiscal consolidation is gaining traction; current account deficit is showing signs of moderation; forex reserves have improved; and the banking sector remains healthy."
Further, MPC member Dr. Ashima Goyal explained in the minutes that when the Fed is tightening, interest rates tend to rise more for EMs that have sharp currency depreciation. Intervention in FX markets has lowered rupee volatility and helped maintain independence from the Fed stance. She added, "Reserves have also recovered."
Further, Goyal said, "Fed action is due to large excess demand, tight labour markets, and an unprecedented deviation from the inflation target. India does not have these conditions and has the space not to follow the Fed. It also started from higher nominal policy rates."
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Business NewsNewsIndiaIndia’s forex reserves drop for third week in row, at 11-week low of $561.27 bn
First Published:24 Feb 2023, 06:18 PM IST
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