RBI’s foreign exchange or FX reserves fell to $564 billion as of August 19--their lowest level since October 2020, as per data released by the central bank today.
The reserves were lower by $6.7 billion on week, largely on account of a $5.8 billion fall in foreign currency assets and fall in gold reserves by $704 million.
“India’s forex reserves dipped to $564 billion as on August 19, lowest since October 2020. The main reason behind this fall is dip in foreign currency assets which the RBI has been using in the forex market to cushion the fall in rupee. Since the start of this year, the geopolitical uncertainties and back-to-back rate hikes by the Fed have led to weakening of emerging market currencies including INR,” said Ritika Chhabra, economist and Quant Analyst at Prabhudas Lilladher.
FX reserves are down by $43.3 billion since the beginning of the financial year, and by $52.8 billion since the beginning of the calendar year. Over the same period, foreign currency assets have steadily declined by $71.8 billion to stand at $501 billion as of August 19.
The reserves had touched a high of $642 billion for the week ended September 3, 2021.
“The forex reserves are likely to stay under pressure in the near term as DXY (US dollar index) is back to its mid-July highs and oil prices are expected to stay elevated,” Chhabra said.