Forex reserves fall $14.9 billion, sharpest weekly drop since Nov 2024 | Economy & Policy News

India’s foreign exchange reserves declined by $14.9 billion to $765.9 billion during the week ended September 18, marking the sharpest weekly fall since November 15, 2024, the latest data released by the Reserve Bank of India showed on Friday.

 

The total reserves stood at $780.8 billion in the previous week ended September 11.

 

Foreign currency assets (FCAs), the largest component of the reserves, declined by $14.8 billion to $631 billion during the reported week. FCAs, expressed in dollar terms, include the effect of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in the reserves.

 

“There was an actual dollar sale of $10.9 billion, and the rest of the fall was because of revaluation loss,” said Gaura Sen Gupta, chief economist at IDFC FIRST Bank.

  

The fall in reserves comes after a sharp rise in the previous weeks, with reserves having touched a record $785.7 billion during the week ended September 5, following foreign currency inflows under the RBI’s FCNR(B) deposit swap scheme.

 

Gold reserves increased by $68 million to $111.3 billion during the reported week, while special drawing rights (SDRs) declined by $106 million to $18.7 billion.

 

India’s reserve position with the International Monetary Fund (IMF) declined by $27 million to $4.9 billion, the RBI data showed.

 

The decline in reserves comes as the rupee remains under pressure amid higher crude oil prices and US Treasury yields, prompting the RBI to intervene in the foreign exchange market.

 

The RBI has been intervening in the foreign exchange market through both spot and forward transactions to contain excessive volatility in the rupee.

 

“The RBI has been intervening in the rupee market because crude has now moved beyond $105 per barrel, and US yield beyond 5 per cent,” said a dealer at a state-owned bank.

 

The central bank had also used dollar-rupee sell/buy swaps as part of its intervention strategy, which helped replenish reserves earlier while absorbing excess rupee liquidity from the banking system.

 

The latest decline follows a sharp recovery in reserves after they had fallen to $666.9 billion in the week ended June 26, as the RBI intervened in the foreign exchange market through dollar sales amid the West Asia crisis.

 

The RBI’s concessional swap window, which mobilised $143.6 billion in foreign currency inflows until September 18, has contributed significantly to the subsequent rise in reserves.