India’s forex reserves have fallen by a total of nearly $30 billion in the last six weeks and are down by $47 billion from the record high of $704.89 billion hit in late September.
Continuing its falling streak, India’s foreign exchange (forex) reserves dropped by $17.76 billion during the week ended November 15, to its over four-month low of $657.892 billion. This is the 7th consecutive week of forex fall.
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The $657.89 billion kitty is the lowest level since July 5 this year when the reserves had stood at $657.16 billion. In the previous week ended November 8, India’s forex reserves had fallen by $6.5 billion.
Forex reserves have fallen by a total of nearly $30 billion in the last six weeks and are down by $47 billion from the record high of $704.89 billion hit in late September.
The continued FPI outflows from the Indian equities have been adversely impacting India’s forex reserves for the past few weeks. Foreign portfolio investors have pulled out a total of Rs 1.65 lakh crore in the past few weeks.
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Changes in foreign currency assets are also caused by the central bank’s intervention in the forex market as well as the appreciation or depreciation of foreign assets held in the reserves.
The outcome of the US elections boosted the dollar and US bond yields, leading to revaluation losses.
Revaluation loss for the reporting week is estimated at $10.4 billion, while the RBI may have net sold dollars worth $7.2 billion in the week of November 15, said Gaura Sen Gupta, India economist at IDFC FIRST Bank.
The rupee fell to its then-record low of 84.4125 last week against the dollar. The currency settled at 84.4450 on Friday, after hitting an all-time low of 84.5075 earlier in the session.
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The central bank’s repeated intervention in the forex market limited a knee-jerk reaction in the local currency market, traders said.
“Despite the recent decline, we believe that India’s forex reserves remain robust in terms of all external adequacy requirements with the import cover comfortably placed at over 11-months,” said Aditi Gupta, economist at Bank of Baroda.
Gupta expects forex reserves to rise to about $675-685 billion by March amid a revival in foreign inflows and a manageable current account deficit.
(With inputs from agencies)
