india Foreign exchange reserves fell by $4.6 billion to $596 billion for the week ended June 10, according to the latest data released by the Reserve Bank of India (RBI). The drop in total reserves was mainly due to a decline in foreign currency holdings worth $4.5 billion, the data showed.
The central bank has intervened aggressively in the foreign exchange market in recent months. RBI sold dollars to curb any rapid depreciation of the rupee.
Most emerging market currencies have come under pressure since the start of the war in Ukraine in late February as investors rush for safe havens. The rupee has lost almost 5% against the dollar in 2022.
Since the end of February, the foreign exchange reserves decreased by $36 billion.
Foreign exchange reserves reached a record high of $642 billion for the week ended September 3. This amount was equivalent to 14 to 15 months of imports for 2021-22.
The current level of foreign exchange reserves is sufficient for less than 10 months of projected imports for 2022-23.
“RBI’s intervention in the market could be one of the reasons (for the fall in foreign exchange reserve),” said Bhaskar Panda, Senior Vice President, Treasury Advisory Group, HDFC Bank.
“Exchange rate volatility will persist, given how central banks approach inflation. The RBI normally tries to rein in that dollar/rupee volatility… Going forward, we need to see how much further depreciation may happen. I think the rupiah could hit 79 against the dollar by the end of the month,” Panda said. Trade standard.
The Rupee, which broke above 78 against the Dollar for the first time earlier this week, continues to trade at this level. The rupee traded in a narrow band on Friday and closed unchanged from its previous close of $78.08.