India’s foreign exchange reserves contracted to $593.75 billion in the week ending June 9, down from $595.06 billion the previous week, according to data published by the Reserve Bank of India (RBI) on Friday.
The decline in forex reserves primarily stemmed from a decrease in foreign currency assets (FCA), which dropped by $1.128 billion to reach $525.073 billion during the reviewed week. FCA, constituting the largest component of forex reserves, encompasses RBI’s investments in US Treasury bonds, bonds of other central banks, and various securities.
However, the decrease in FCA was partially offset by a slight rise in gold reserves, which increased by $29 million to $40.958 billion as of June 9.
The decline in forex reserves comes at a time when the Indian rupee faces pressures due to the ongoing war in Ukraine and escalating crude oil prices. Since the beginning of this year, the rupee has depreciated by over 4% against the US dollar.
To support the rupee, the RBI has implemented several measures, including selling dollars from its reserves and raising short-term interest rates. Nevertheless, the central bank has emphasized its stance of refraining from intervening in the foreign exchange market to curb further depreciation of the rupee.
The RBI has projected that the current account deficit will likely widen to 3% of the GDP in the current fiscal year, compared to 1.5% in the previous year.
Assuring market stability, the RBI has reaffirmed its vigilant monitoring of the situation and its commitment to taking appropriate measures as necessary to maintain stability in the foreign exchange market.
