India’s Forex reserves drop $7.54Bn to $572.71Bn

The country’s foreign exchange reserves reduced by $7.541 billion to $572.712 billion last week, with foreign currency assets declining heavily as well, as the Reserve Bank continued to intervene in the market to prevent the fall of the rupee.

The rupee fell by 5 paise to close at 79.90 against the US dollar. It had touched an all-time intraday low of 80.06 against the US dollar on Thursday. Meanwhile, gold reserves dropped by $830 million to $38.356 billion. The Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) declined by $155 million to $17.86 billion.

The foreign currency assets (FCAs) dipped by $6.527 billion to $511.562 billion compared to the previous week. Expressed in dollar terms, FCAs include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

The RBI Governor Shaktikanta Das said that there is a genuine shortfall of supply of forex in the market relative to demand because of import and debt servicing requirements and portfolio outflows, the RBI has been supplying US dollars to the market to ensure that there is adequate forex liquidity.

He added that recent developments in the forex market have generated intense debate, including predictions of the rupee dropping to record lows as foreign portfolio funds exit India. “In fact, the Indian rupee is holding up well relative to both Advanced and EME peers. This is because our underlying fundamentals are strong, resilient, and intact. The recovery is gradually strengthening. The current account deficit is modest. Inflation is stabilizing. The financial sector is well-capitalized and sound. The external debt to GDP ratio is declining. The foreign exchange reserves are adequate,” Das said.