India’s foreign exchange reserves fell for the second straight week, reflecting the Reserve Bank of India’s intervention in the exchange market in the wake of the global turmoil since mid-August.
Reserves had fallen by $2.89 billion in the week ended September 4 to an outstanding $317.15 billion, data from the RBI showed.
This comes on the back of the biggest weekly fall of $3.4 billion in the previous week. In August, the rupee had weakened by 3.5% to fall past the key 66/$ level and hit a fresh two-year low on the back of a sharp fall in global equity markets and currencies.
On August 24, RBI governor Raghuram Rajan had said the central bank would not hesitate to use forex reserves to stabilise the rupee.
Part of the fall in the reserves could also be attributed to valuation changes given the sharp movement in the currencies globally. The RBI invests a large part of foreign currency assets in US treasury notes and the remaining in assets denominated in euro and other currencies. The dollar has gained phenomenally against most currencies, which could have resulted in a drag on the reserves.
Reserves had last fallen by $4.2 billion in the week ended May 31 in 2013 when foreign portfolio investors began exiting India in droves and the central bank had to intervene and sell dollars heavily.
The year saw the rupee hit an all-time low of 68.85/$ by August as FPIs pulled out record amount of dollars from the debt market. While the depreciation of the currency this time around has been similarly quick, it has been contained easily.