Foreign exchange reserves fell by $4.5 billion after rising marginally in the previous week. The reserves stood at $528.4 billion for the week ended October 14, data released by the Reserve Bank of India showed. The decline in the reserves was on account of foreign currency assets and gold reserves. Forex reserves have been on the decline since July 29, with an exception of the previous week, when forex assets grew by $204 million.
The decline in the forex reserves comes amid further depreciation of the rupee to sub 82-levels and media reports of intervention of the central bank in the forex market to support the Indian currency. The rupee ended marginally higher at 82.69 to a dollar on reports of the RBI intervention. The RBI on several occasions said it will intervene in the market to curb the volatility in the rupee.
Also Read: 67% of decline in forex reserves due to valuation changes: Shaktikanta Das
India’s forex reserves played a critical role in cushioning the impact of a severe turmoil witnessed in the global markets in recent months, T Rabi Shankar, deputy governor of the RBI, said. “Reserves continue to be healthy and complement the strong macroeconomic fundamentals of the Indian economy,” he said at the annual day event of the Foreign Exchange Dealers Association of India.
Around 67% of the decline in foreign exchange reserves during the current fiscal was owing to valuation changes thanks to a stronger US dollar and higher US bond yields, RBI governor Shaktikanta Das had said in the latest post-policy conference. With the dollar strength showing no signs of abating, the rupee may continue to remain under pressure, Aditi Gupta, economist at Bank of Baroda, said. In addition, factors such as high domestic inflation, reduction in exports and rising oil prices due to production cuts will also be negatives for the Indian currency, she said.
Earlier, OPEC+ decided to cut crude oil production quota by 2 million barrels per day, starting in November.
