India’s forex reserves have fallen by nearly $30 billion in the past six weeks and are down $47 billion from a record high of $704.89 billion in late September.
Continuing its declining streak, India’s foreign exchange (forex) reserves fell by $17.76 billion to a four-month low of $657.892 billion during the week ended November 15. This is the 7th consecutive week of decline in forex.
The $657.89 billion kitty is the lowest level since July 5 this year when reserves stood at $657.16 billion. India’s forex reserves fell by $6.5 billion in the previous week ended November 8.
Forex reserves have fallen by nearly $30 billion over the past six weeks and are down $47 billion from a record high of $704.89 billion in late September.
Incessant FPI outflows from Indian equities have been adversely affecting India’s forex reserves for the past few weeks. Over the past few weeks, foreign portfolio investors have invested a total of Rs. 1.65 lakh crore has been withdrawn.
Foreign currency assets also fluctuate due to central bank intervention in the forex market as well as appreciation or depreciation of foreign assets held in reserve.
The US election results boosted the dollar and US bond yields, leading to revaluation losses.
Gaura Sen Gupta, India economist at IDFC First Bank, said the revaluation loss for the reporting week was estimated at $10.4 billion, while the RBI would have netted $7.2 billion in the week of November 15.
The rupee fell to its all-time low of 84.4125 last week against the dollar. The currency settled at 84.4450 on Friday, having touched an all-time low of 84.5075 earlier in the session.
The central bank’s repeated interventions in the forex market had a knock-on effect in the local currency market, traders said.
Bank of Baroda economist Aditi Gupta said, “Despite the recent decline, we believe India’s forex reserves remain strong in terms of all external adequacy requirements with over 11-month import cover.”
Gupta expects forex reserves to rise to around $675-685 billion by March amid a revival in foreign inflows and a manageable current account deficit.