India’s forex reserves fall $11.68 billion to $716.81 billion, biggest drop in over a year
The $11.68 billion drop came as the central bank intervened heavily in foreign exchange markets by selling dollars to support the rupee amid pressure linked to the ongoing Iran conflict and rising global oil prices. Analysts also noted that strong US bond yields and a strengthening dollar were factors that put pressure on reserves throughout the period.
Gaura Sen Gupta, economist at IDFC FIRST Bank, speculated that the decline reflected a mix of central bank intervention and valuation changes in reserve assets. “RBI has neutered the liquidity impact of dollar sales through on-screen bond purchases,” he told Reuters.
According to their estimates, the decline in reserves included net dollar sales by the RBI of about $6.1 billion and valuation losses of about $5.4 billion.
Most of the decline came from foreign exchange holdings, which fell $9.8 billion during the week. The value of gold reserves also decreased by 1.6 billion dollars.
Foreign exchange assets, which constitute the largest component of India’s reserves, are denominated in US dollars and reflect the impact of fluctuations in the value of other currencies held by the central bank.
India’s foreign exchange reserves include the country’s Special Drawing Rights (SDR) and Reserve Tranche Position in the International Monetary Fund. According to RBI data, foreign exchange assets stood at $563.25 billion and gold reserves stood at $130.02 billion in the week ending March 6. SDRs were recorded as $18.72 billion, the Reserve Tranche Position was recorded as $4.83 billion, and total reserves reached $716.81 billion.
According to the previous week’s figures, foreign exchange assets were 573.13 billion dollars, gold reserves were 131.63 billion dollars, SDRs were 18.87 billion dollars, Reserve Tranche Position was 4.87 billion dollars, and total reserves were 728.49 billion dollars.
