A first in 9 weeks: foreign exchange reserves increase by 204 million dollars

The Reserve Bank of India’s (RBI) foreign exchange reserves increased for the first time in nine weeks. According to the latest data, foreign exchange reserves stood at $532.87 in the week ended Oct. 7, up $204 million from a week ago. Before that, the RBI’s foreign exchange reserves last saw an increase of $2.3 billion in the week ended July 29.

But during the week under review, the RBI’s foreign currency assets registered a decline of $1.3 billion to $471.5 billion. The value of central bank gold holdings increased by $1.4 billion to $38.9 billion, the data showed. During the period, the rupee depreciated by 1.2% against the dollar; it weakened past the 82 per dollar mark for the first time on October 7. So far in 2022, the rupee has depreciated by 9.7% against the greenback.

Analysts said there was an increase in foreign exchange reserves, even as the RBI continued to protect the rupee from excessive volatility through dollar sales.

The central bank likely intervened through the futures segment of the currency market to prevent its overall foreign exchange reserves from posting a sharp decline, analysts said.

“For the week in question, the Euro also depreciated and the Dollar Index rose, so there will be a negative valuation impact. FX The way the dollar index moves, an impact of $1.5-2 billion may be the weekly impact,” said Anindya Banerjee, Vice President, Currency Derivatives and Interest Rate Derivatives , Kotak Securities. Trade standard.

“The RBI (dollar) sale would largely be through futures contracts and that’s why the futures premiums have come down a lot. That way the impact isn’t really felt on global reserves,” he said.

CR Forex Advisors MD Amit Pabari said, “Weekly changes in the FX reserve figure are just positive $204 million, which is significantly less compared to the recent drop in the pool. This could be explained by the weak recovery in US bond prices; at least 67% of changes in reserves are due to revaluation.

The RBI’s foreign exchange reserves have fallen sharply since the start of the war in Ukraine in late February. As of February 25, aggregate reserves stood at $631.53 billion, nearly $100 billion more than the current level.

Last month, RBI Governor Shaktikanta Das said 67% of the decline in foreign exchange reserves in the current financial year was due to valuation changes caused by a stronger US dollar.

Foreign exchange reserves worth $553.1 billion as of September 2 represented nine months of projected imports for the current financial year, the RBI said last month. As of September 3, 2021, the RBI’s reserves stood at $642.5 billion, representing nearly 15 months’ import cover.