India's forex reserves decline to 7-month low of $644B
India's foreign exchange (forex) reserves have witnessed a steep fall, hitting a low not seen in over seven months. According to the Reserve Bank of India (RBI), the reserves were at $644.39 billion on December 20, marking their third consecutive weekly fall. The reserves fell by $8.5 billion during the reporting week, marking their largest weekly decline in over a month.
Forex reserves: A 10-week downward trend
The decline in India's forex reserves has been consistent, with declines seen in 10 of the last 11 weeks. Before the latest decline, a cumulative fall of $5.2 billion was recorded over two weeks. The current reserves mark a new multi-month low for the country. These fluctuations are largely driven by RBI's actions in the forex market and changes in foreign assets in these reserves.
RBI's role in managing forex reserves
The RBI is instrumental in managing forex reserves by intervening on both sides of the market to prevent excessive fluctuations in the Indian rupee. The recent decline in forex reserves is largely due to these interventions to prevent a sharp fall in the rupee's value. The currency witnessed a sharp fall against the US dollar, hitting a fresh low of ₹85.73 on Friday. This is the currency's ninth straight day of decline, further highlighting the challenges in India's currency market.
