Finance
India’s foreign exchange reserves declined by $3.2 billion to a more than five-month low of $654.86 billion as of December 6, according to Reserve Bank of India (RBI) data released on Friday. The reserves had increased by $1.5 billion in the week ending November 29, after falling by $48.3 billion in the previous eight weeks.
Changes in foreign currency assets are driven by both the central bank’s activity in the forex market and the appreciation or depreciation of foreign assets kept in reserves. The RBI intervenes on both sides of the forex market to prevent excessive volatility in the rupee.
According to Gaura Sen Gupta, India economist at IDFC FIRST Bank, the RBI is projected to have net sold dollars worth $6.1 billion during the week covered by the FX reserves data, with a revaluation gain of roughly $2.7 billion. Last week, the rupee fell to an all-time low of 84.7575, dragged down by weakness in the Chinese yuan and strong dollar bids in the non-deliverable futures (NDF) market, leading the RBI to intervene.
The currency dropped 0.2% last week. The domestic unit closed at 84.7875 on Friday, down for the sixth week in a row. It hit a record low of 84.88 earlier this week, weighed down by a persistent depreciation bias and increased demand for the US dollar in the NDF market. The Forex reserves also include India’s reserve tranche position in the International Monetary Fund.
Source: IE
