Forex reserves declined by $1.431 billion to $363.9 billion in the week to December 2, RBI data released on Friday showed. The country's foreign exchange reserves had touched a record high of $371.99 billion at the end of September.
Forex reserves declined by $1.431 billion to $363.9 billion in the week to December 2, RBI data released on Friday showed. The country’s foreign exchange reserves had touched a record high of $371.99 billion at the end of September.
Forex dealers said the decline was primarily due to the Reserve Bank of India selling dollars in the market to stem the fall of the rupee, which almost closed at a record low at 68.77 on November 28. The last time the rupee closed lower than this level was on August 28, 2013, when it had closed at 68.8250, a lifetime low.
The fall in the rupee was primarily due to the dollar’s phenomenal rise ever since Donald Trump won the US presidential election earlier this month. The dollar index, which measures the strength of the greenback vis-a-vis a basket of other currencies, has gained nearly 4% since the day of the election, and is currently hovering around at 101.50 level, after having touched a 13-year high of 101.70 on November 24.
President-elect Trump’s spending plan for infrastructural development has pushed the market to factor in a higher probability of rate hikes by the US Federal Reserve. That is why the dollar has been trading strong against all emerging-market currencies. In fact, Fed fund futures on Friday showed a 100% probability of a 25-50 bps rate hike and a 94% probability of a 50-75 bps rate hike being announced at the December FOMC meet .
Foreign currency assets, which constitute a significant portion of the overall reserves, fell by $957.9 million to $340.131 billion in the week under review, the data showed. Gold reserves came in at $19.982 billion, down $477.9 million from the previous week.