Foreign exchange reserves rose for the second straight week to stand at $355.35 billion as on August 21 even as the rupee weakened sharply during the same period following a surprise devaluation of the Chinese yuan.
Last week, forex reserves rose by $919.7 million but the rupee depreciated by 0.78%, data from the RBI showed.
The currency ended at 66.16/$ on Friday, down 3% so far in August. Foreign currency assets were up by $894 million in the week ended August 21, indicating that the central bank may have bought dollars from the market.
Foreign currency assets are a loose indicator of the central bank’s interventions in the market.
However, change in reserves also reflects the movement in currencies such as euro and the dollar as part of the reserves are invested in assets denominated in these currencies.
The Indian rupee has lost 3.4% ever since the Chinese yuan was devalued twice in the week ended August 14.
It has been the worst performing currency in Asia.
Even as the rupee fell to a two-year low, there were talks that the RBI had stepped in to sell dollars and slowdown the rupee’s depreciation.
This week too, the central bank was seen selling dollars to prevent a sharp fall of the rupee. The currency fell past the psychological 66/$ mark on August 17 following a global stock and currency market rout on worries over the Chinese economy.
The currency has recovered to end at 66.16/$ on Friday. Forex reserves are back to the all-time high of $355 billion despite the outflow of dollars in August.
Foreign institutional investors have sold $155 million worth of bonds and $2.1 billion worth of shares so far in August.
The RBI has been both on the buy and sell side in the forex market.