Mumbai: India’s foreign exchange reserves declined by USD 5.898 billion to USD 617.303 billion in the week that ended on January 5, 2023, the latest data released by the Reserve Bank of India showed.
During the week, India’s foreign currency assets (FCA), the biggest component of the forex reserves, declined from USD 4.966 billion to USD 546.650 billion, the central bank’s weekly statistical data showed.
Gold reserves during the week declined by USD 839 million to USD 47.489 billion.
In the calendar year 2023, the RBI added about USD 58 billion to its foreign exchange kitty. In 2022, India’s forex kitty slumped USD 71 billion cumulatively.
Forex reserves, or foreign exchange reserves (FX reserves), are assets that are held by a nation’s central bank or monetary authority.
It is generally held in reserve currencies, usually the US Dollar and, to a lesser degree, the Euro, Japanese Yen, and Pound Sterling.
In October 2021, the country’s foreign exchange reserves touched an all-time high of about USD 645 billion. Much of the decline, though marginal on a cumulative basis, since then can be attributed to a rise in the cost of imported goods in 2022.
Also, the relative fall in forex reserves could be linked to the RBI’s intervention, from time to time, in the market to defend the subsequent depreciation in the rupee against a surging US dollar.
Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, to prevent a steep depreciation in the rupee.
The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.
