India’s forex reserves dwindle $8 billion

India’s foreign exchange reserves dwindled by $8.062 billion to $580.252 billion in the week ending July 8, 2022.

The sharp drop in reserves came on the heels of the Reserve Bank of India selling dollars to support the rupee, which fell from 79.04 per dollar on July 1 (Friday) to 79.26 on July 8 (Friday).

The last time reserves were around the $580 billion level was in the week ending March 5, 2021.

Dip in FCA

The decline in reserves in the reporting week came mainly on the back of a $6.656 billion drop in Foreign Currency Assets (FCA).

FCA consists of multi-currency assets held in multi-asset portfolios (investment in securities, deposits with other central banks, the Bank for International Settlements, and deposits with commercial banks abroad).

The other three components of reserves also declined – gold by $1.236 billion, Special Drawing Rights ($122 million) and reserve position in the International Monetary Fund ($49 million).

For the calendar year to date, reserves have diminished by $31.643 billion. Year-to-date in March, reserves have decreased by $27.057 billion.

rupee flat

Meanwhile, the rupee closed almost unchanged on Friday as the Reserve Bank of India (RBI) mounted a strong defense of the local currency by selling dollars.

The Indian unit closed at 79.8775 against the US dollar versus the previous close at 79.8750.

On the day, the INR tested as low as 79.96 on dollar demand from FPIs and importers. However, RBI intervention ensured that the Indian unit closed below 79.90.