RBI reserves fall close to $30 billion as it stepped in to defend the rupee
India’s forex reserves dropped by $6.78 billion to $675.65 billion for the week ended November 8, the Reserve Bank of India (RBI) said on Friday.
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After hitting an all-time high of $704.89 billion in end-September, the foreign exchange basket has been declining for multiple weeks. In total, they have fallen $29.5 billion in the past six weeks.
The fall in foreign currency assets has been attributed to the central bank’s likely intervention in the foreign exchange market in order to limit the depreciation in the rupee, said forex traders. During the period, the RBI intervened in the market on both, selling and buying sides in the market. In the last six weeks, the rupee had continuously hit fresh record lows. On November 8, the rupee hit 84.39 against the greenback.
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Since the win of Donald Trump in the just-concluded US presidential election, the dollar index has been hovering to four-month high, in addition to a rise in US Treasury yields. The combination of the two factors have kept the rupee under pressure, and it is expected to sustain till the markets get clarity over policies to be undertaken by the Trump administration. Moreover, persistent outflows from the domestic equity market added one more layer of pressure.
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For the week ended November 8, foreign currency assets, a major component of the reserves, decreased by $4.467 billion to $585.38 billion, the data released on Friday showed. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
Traders said that without the intervention from the central bank, the rupee would have depreciated at a much faster pace.
