India’s foreign exchange reserves plummeted to $532.66 billion for the ninth straight week ending on September 30. This is the lowest level since July 24, 2020 as per Reserve Bank of India’s (RBI) weekly statistical supplement.
Forex reserves of Asia’s Third largest economy fell by $4.85 billion as per data released by RBI. This decline in foreign exchange reserves can be attributed to a fall in Foreign Currency Asset (FCA) which is a major component of the overall foreign exchange reserves.
FCA are maintained as a multi- currency portfolio consisting of major currencies such as Dollar, Euro, Pound sterling, Japanese Yen and are valued in terms of US dollars. Foreign currency assets declined $4.41 billion to $472.81 billion for the week ending on September 30. Further Gold reserves fell $281 million to $37.61 billion.
This has come at a time when the rupee breached the key 82 per dollar level for the first time pushing the rupee to a new low. The Indian rupee has depreciated more than 9 per cent this year.
Experts worry that this downward trend is expected to continue in the near future amid rising fear of recession, hike in interest rates by the Fed and the dollar index moving upwards. The central bank is expected to find ways to replenish this depletion in foreign exchange reserves to stabilize the depreciating Indian rupee.
RBI governor Shaktikanta Das said in his monetary policy address on September 30 that our forex reserves umbrella continues to stay strong despite uncertainty in the global markets. RBI has been continuously intervening in the foreign exchange market based on its continuous assessment of the existing and evolving situations.
For the rupee he said that it is a freely floating currency and the exchange rate is market determined . The RBI does not have a fixed exchange rate in mind. However, the major focus is on macroeconomic stability and market confidence.