India's forex reserves fell USD 2.06 billion after extending gains for eighth straight week

India's Forex rose by USD 1.983 billion to USD 688.129 billion in the week that eneded on April 25.

For the reporting week, the foreign currency assets increased USD 514 million to USD 581.177 billion, the apex bank's data shows.

The FCAs are the largest components of the foreign exchange reserves which reflects the valuation impact of non-US currencies like euro, pound, and yen kept in the reserves. They are written in the dollar terms.

The gold reserves also witnessed a hit, decreasing USD 2.545 million to USD 81.82 billion during the reporting week.

The Special Drawing Rights (SDRs), which are kept with the International Monetary Fund (IMF) also saw a hit of USD 30 million, lowring at USD 18.558 billion, according to the RBI data.

The forex reserves started falling after reaching an all-time high of USD 704.89 billion in September, only to recover afterwards. The decline in reserves was most likely due to RBI intervention, aimed at preventing a sharp depreciation of the Rupee. The Indian Rupee is now at or near its all-time low against the US dollar.

An estimate by the apex bank suggests that India's foreign exchange reserves are sufficient to cover approximately 10-12 months of projected imports.

In 2023, India added around USD 58 billion to its foreign exchange reserves, contrasting with a cumulative decline of USD 71 billion in 2022.

In 2024, the reserves rose by a little over USD 20 billion.Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.

The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The Central bank strategically buys dollars when the Rupee is strong and sells when it weakens. (ANI)