India’s foreign exchange (forex) reserves fell $9.646 billion to $622.275 billion in the week ending March 11, the largest drop in over two years, as the Reserve Bank of India (RBI) sold dollars in large quantities to prevent the rupee’s value from falling further.
Foreign currency assets, the largest component of FX reserves, fell by $11.108 billion to $554.359 billion during the week under review, according to the RBI’s weekly statistics supplement.
The effect of appreciation or depreciation of non-dollar currencies held in foreign exchange reserves, such as the Euro, the British Pound Sterling, and the Japanese Yen, is included in the foreign currency assets when expressed in US dollar terms.
This steep drop in the country’s foreign currency holdings comes on the heels of the rupee’s all-time low last week.
On March 7, the Indian rupee hit a new low of 77.02 against the US dollar.
The RBI engaged in the currency markets by selling dollars, according to market observers. During the week, the central bank is thought to have sold $1 billion worth of cash to prevent further depreciation in the Indian rupee.
The drop in foreign reserves during the week ending March 11 was the most significant in nearly two years. During the week ending March 20, 2020, the country’s foreign exchange reserves fell by $11.9 billion. In the week ending September 3, 2021, the country’s currency reserves reached an all-time high of $642.453 billion.
The value of India’s SDRs with the International Monetary Fund (IMF) fell by $53 million to $18.928 billion. According to RBI data, India’s reserve position at the IMF fell by $7 million to $5.146 billion in the week ending March 11.