India’s foreign exchange reserves at lowest in 23 months

The Reserve Bank of India’s (RBI) overall foreign exchange reserves fell by $7.9 billion to $553.11 billion in the week ending September 2, according to the latest central bank data. .

Reserves are at their lowest since October 9, 2020, according to RBI data. Analysts cited the RBI’s defense of the rupiah through dollar sales amid a global strengthening greenback as one of the reasons for the decline in reserves.

Incidentally, in the week ending September 2, the rupiah marked a new intraday low of 80.13 per US dollar.

The drop in foreign exchange reserves in the week ended September 2 was largely due to a drop in foreign currency assets, which fell by $6.5 billion to $492.12 billion, according to data from the RBI.

“The RBI has continuously intervened in the foreign exchange markets to protect against any sharp depreciation of the rupee. In August alone, the RBI’s foreign exchange reserves fell from $573.9 billion to $553.1 billion dollars while the rupee remained resilient among its Asian peers and became the median performer,” Dilip Parmar, research analyst at HDFC Securities, told Business Standard.

“The forex pool declined by $7.9 billion – as shown in the RBI’s weekly statistical supplement – which was due to a devaluation of currencies other than the dollar and the selling off of dollars to curb the unwarranted volatility in the foreign exchange market,” he said.

As the rupee weakened to a new low of 80.13 per US dollar on August 29, the national currency ended this week up 0.1% against the greenback.

Dealers had said the RBI sold more than $1 billion in the forex market on August 29 alone as it curbed rupee weakness.

Earlier this week, RBI Governor Shaktikanta Das said the central bank’s interventions in the foreign exchange market were not only aimed at preventing excessive volatility but also at anchoring expectations around currency depreciation. rupee. The rupiah has weakened 6.6% against the dollar so far in 2022. The RBI has drawn heavily on its reserves since Russia invaded Ukraine in late February, an event that sparked a global stampede towards investments for the safety of the US dollar.

From $631.53 billion as of Feb. 25, the RBI’s overall foreign exchange reserves fell by nearly $80 billion, largely reflecting the central bank’s defense of the rupiah.

“The USD-INR pair was once again approaching the 80.00 mark, but rose to a high of 79.94 and reversed due to heavy RBI intervention, which also reflects the decline in foreign exchange reserve data for the week,” said the vice president of Shinhan Bank. -President (Global Trading Center) Kunal Sodhani said.

“USD-INR may continue to hold at 80.00 for some time, while immediate support lies at 79.10,” he said.

In August, the RBI said reserves worth $573 billion were equivalent to 9.4 months of projected imports for the current financial year.