The country’s foreign exchange reserves fell to their lowest levels in nearly two years, data released by the Reserve Bank of India showed on Friday. The reserves fell $7.94 billion to $553.1 billion as of September 2 — the lowest levels seen since October 9, 2020. Economists attribute the fall to sales of dollars by the RBI to help arrest the slide in the rupee.
The central bank has been using its forex reserves to stem the rupee’s slide, especially after currency hit a new low of 80.1288 against the dollar in late August. Earlier this week, RBI governor Shaktikanta Das had said the central bank is in the currency market almost everyday with the twin objectives of curbing volatility and anchoring expectations for rupee depreciation. Das said the stability of the exchange rate is an intrinsic element of “our overall macroeconomic and financial stability”.
“The Indian rupee has witnessed a lot of resilience around the key Rs 80.10 mark over the last couple of days, from where it has reversed course, and now seems to witness appreciation in coming days towards the 79.20 mark,” Sugandha Sachdeva, vice president at Religare Broking, said in a note.
Rupee has fallen about 7% since January, as the dollar strengthened relentlessly, but the depreciation has been less severe than those of some other EM and Asian currencies. It has been trading close to levels of 80 against the dollar for near two months now. It has gained in the last couple of days following the fairly sharp drop in prices of Brent, which fell below $90 a barrel. The slight weakening of the dollar also helped.