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The country’s forex reserves have been on a declining trend for the last few weeks, and the drop has been attributed to revaluation along with forex market interventions by RBI to help reduce volatilities in the rupee.
For the week ended January 10, foreign currency assets, a major component of the reserves, decreased by $9.469 billion to $536.011 billion.
India’s foreign exchange (forex) reserves declined $8.714 billion to $625.871 billion in the week ended January 10, according to the latest RBI data. The country’s forex kitty is 11.20 per cent lower as against the peak level of $704.885 billion recorded in end-September.
In the previous week ended January 3, the reserves had fallen by $5.693 billion to $634.585 billion.
The reserves have been on a declining trend for the last few weeks, and the drop has been attributed to revaluation along with forex market interventions by the RBI to help reduce volatilities in the rupee. The forex reserves had increased to an all-time high of $704.885 billion in end-September.
For the week ended January 10, foreign currency assets, a major component of the reserves, decreased by $9.469 billion to $536.011 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.
Gold reserves increased by $792 million to $67.883 billion during the week. The special drawing rights (SDRs) were down by $33 million to $17.781 billion, the RBI said.
India’s reserve position with the IMF was down by $4 million at $4.195 billion in the reporting week, the apex bank data showed.
Meanwhile, a study published in the Reserve Bank’s latest Bulletin said foreign exchange interventions by the central bank effectively countered capital flows volatility — the main source of exchange rate volatility in India.
The study titled ‘Foreign Exchange Intervention: Efficacy and Trade-offs in the Indian Experience’, investigates the effectiveness of forex interventions undertaken by the Reserve Bank of India (RBI).
The study finds that the volatility of portfolio flows, induced by global spillovers, is the main source of exchange rate volatility in India.
“Foreign exchange interventions, both spot and forward, effectively counter capital flows volatility, with symmetric effects of purchases and sales,” said the study by a team led by Michael Patra, who demitted the office of RBI Deputy Governor earlier this month.
