India’s foreign exchange reserves dwindled by $8.062 billion to stand at $580.252 billion in the week ended July 8, 2022.
The sharp fall in reserves came in the wake of the Reserve Bank of India (RBI) selling dollars to prop up the rupee, which depreciated from 79.04 per Dollar on July 1 (Friday) to 79.26 on July 8 (Friday).
The last time the reserves were around the $580 billion level was in the week ended March 5, 2021.
Dip in FCA
The dip in reserves in the reporting week came mainly on the back of foreign currency assets (FCA) declining by $6.656 billion.
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 three components of the reserves too declined — gold by $1.236 billion, special drawing rights ($122 million) and the reserve position in the IMF ($49 million).
During the calendar year so far, the reserves dwindled by $31.643 billion. Since March-end till date, the reserves have declined by $27.057 billion.
Rupee flat
Meanwhile, the rupee ended almost flat on Friday as the Reserve Bank of India (RBI) mounted a solid defence of the domestic currency by selling dollars.
The Indian unit closed at 79.8775 per USD against the previous close of 79.8750.
Intra-day, INR tested a low of 79.96 on demand for the greenback from FPIs and importers. However, RBI’s intervention ensured that the Indian unit closed below 79.90 level.