India's foreign exchange reserves experienced a significant dip, reaching a nearly two-month low and marking the biggest weekly decline in over six months for the week ending August 18. The latest data was unveiled by the Reserve Bank of India (RBI) on Friday (August 25).
The forex reserves saw a substantial drop of $7.28 billion, settling at $594.90 billion. Just a week ago, as of August 11, India's forex reserves had risen by $708 million to $602.161 billion.
According to the Weekly Statistical Supplement, which was released by the RBI,
foreign currency assets (FCAs) experienced a significant downturn as well, plummeting by $6,613 million to hover around $527.786 billion.
Parallelly, gold reserves experienced a dip of $515 million, landing at $43.824 billion. Further, data from the RBI revealed that special drawing rights (SDRs) also faced a decrease of $119 million, falling to $18.205 billion.
In October 2021, India's foreign exchange reserves had reached a record-breaking high of $645 billion. However, the trajectory has been downward recently due to the central bank's deployment of the forex kitty to bolster the Indian rupee in response to global pressures.
The RBI periodically intervenes in the market by managing liquidity, including the sale of dollars, to avert any abrupt depreciation in the rupee's value. This proactive approach by the RBI entails vigilant monitoring of the foreign exchange markets.
The central bank's intervention is aimed at preserving orderly market conditions by mitigating excessive volatility in exchange rates, and this is executed without being tied to predetermined target levels or bands.
(Edited by : Shoma Bhattacharjee)
