Forex reserves down $8 billion in the week ended September 2

The country’s foreign exchange reserves shrank by a whopping $7.941 billion in the week ended September 2, to stand at $553.105 billion.

The last time that the reserves were around the aforementioned level was in October 2020.

During the calendar year so far, the reserves have dwindled by $89.348 billion. Since March-end till date, the reserves have declined by $54.204 billion.

The sharp decline in reserves during the reporting weak came as the Reserve Bank of India mounted a defence of the Indian currency to keep it from breaching the psychologically crucial 80 to the dollar mark.

The rupee closed 7 paise stronger at 79.7950 per dollar in the week ended September 2, against previous Friday’s close of 79.8650.

The dip in reserves in the reporting week was mainly due to  foreign currency assets (FCA) and gold reserves declining by $6.527 billion and $1.339 billion, respectively.

FCA comprises multi-currency assets that are held in multi-asset portfolios (investment in securities, deposits with other central banks & BIS, and deposits with commercial banks overseas).

The other two components of the reserves too declined — special drawing rights and the reserve position in the IMF by $50 million and $24 million, respectively.

At an event organised by FIMMDA earlier this week, Reserve Bank of India Governor Shaktikanta Das emphasised that India’s foreign exchange reserves of $561 billion (as on August 26) provide a cushion against external shocks, as is being demonstrated on a day-to-day basis. Moreover, the reserves are also reinforced by forward assets.

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