The Reserve Bank of India’s foreign exchange reserves declined by $4.8 billion to $670.12 billion in the week ended August 9, with the central bank likely selling dollars in order to prevent excessive volatility in the exchange rate amid global market volatility.
The fall in the RBI’s foreign exchange reserves last week was largely due to a decline in the central bank’s foreign currency assets, which dropped $4.1 billion to $587.96 billion, latest data showed.
In the week ended August 9, the rupee weakened 0.2% against the US dollar and marked new lows versus the greenback as weak American data led to fears of an economic slowdown in the country, sparking a global wave of risk aversion. The local currency closed at 83.95/$1 on August 9.
The RBI’s stated position is that it intervenes in the currency market only to curb excessive volatility in the rupee’s exchange rate. Changes in the RBI’s reserves are not only because of dollar sales or purchases by the central bank but also reflective of the impact of revaluation.
The central bank publishes precise details of its currency market interventions with a two-month lag.
In the week ended August 9, the RBI’s gold reserves fell $860 million to $59.24 billion, the data showed.
Last week’s decline notwithstanding, the RBI’s foreign exchange reserves have risen sharply so far in 2024, in line with the central bank’s stated commitment to build up reserves.
As on December 29, 2023, the RBI’s reserves were at $623.20 billion.
