Finance
The Reserve Bank of India’s (RBI) headline foreign exchange reserves fell by $7.9 billion to $553.11 billion in the week ending September 2, according to the most recent central bank data.
According to the RBI data, reserves are at their lowest since October 9, 2020. Analysts cited the RBI’s dollar sales to defend the rupee against a globally strengthening greenback as one of the reasons for the drop in reserves.
In addition, during the week ending September 2, the rupee hit a new intraday low of 80.13 per US dollar.
The drop in foreign exchange reserves in the week ended September 2 was largely due to a drop in foreign currency assets, which fell $6.5 billion to $492.12 billion, according to RBI data.
“The RBI has been continuously intervening in forex markets to protect against any sharp depreciation in the rupee. In August alone, the RBI’s forex reserves declined from $573.9 billion to $553.1 billion while the rupee remained resilient among Asian peers and became the median performer,” HDFC Securities research analyst Dilip Parmar told.
“The forex kitty declined by $7.9 billion — as the RBI weekly statistical supplement showed — which was on the back of some non-dollar currency devaluation and dollar selling to curb the unwarranted volatility in the forex market,” he said.
While the rupee fell to a new low of 80.13 per US dollar on August 29, it ended the week 0.1 percent stronger against the greenback.
According to dealers, the RBI sold more than $1 billion in foreign exchange on August 29 alone to stem the rupee’s weakness.
Earlier this week, RBI Governor Shaktikanta Das stated that the central bank’s interventions in the foreign exchange market were aimed not only at preventing excessive volatility, but also at anchoring expectations surrounding the rupee’s depreciation. So far in 2022, the rupee has fallen 6.6% against the dollar.
Since Russia invaded Ukraine in late February, the RBI has depleted its reserves significantly, sparking a global rush of investment to the safety of the US dollar.
The RBI’s headline foreign exchange reserves have fallen nearly $80 billion from $631.53 billion on February 25, reflecting the central bank’s defense of the rupee.
“The USD-INR pair was once again approaching to test 80.00 mark, but made a high of 79.94 and reversed due to heavy intervention seen from the RBI which is also a reflection from the declining forex reserves data for the week,” Shinhan Bank’s Vice-President (Global Trading Centre) Kunal Sodhani said.
“USD-INR may continue to hold 80.00 levels for some more time, while immediate support comes in at 79.10 levels,” he said.
The RBI stated in August that reserves totaling $573 billion were equivalent to 9.4 months of imports projected for the current fiscal year.
Source:BS
