India’s Forex Reserves Drop Over $2 Billion, Breaking Record High: RBI Report

According to data released by the Reserve Bank of India (RBI) on Friday, India’s foreign exchange reserves, also known as forex reserves, decreased by more than $2 billion to $646.673 billion in the week ending on May 24.

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In the previous week, the forex reserves had increased by $4.549 billion to reach an all-time high of $648.700 billion. This surpasses the previous all-time high recorded in October 2021.

Components of the Decline

During the reporting week ending May 24, the country’s foreign currency assets (FCA), the largest component of the forex reserves, decreased by $1.510 billion to $567.499 billion, as per the RBI data.

Gold reserves also saw a decline, standing at $56.713 billion, down by $482 million.

Implications

So far this year, the forex reserves have grown by about $28 billion in total.

According to a RBI report, India’s forex reserves are sufficient to cover around 11 months of projected imports for the country.

In 2023, the central bank had added approximately $58 billion to its foreign exchange reserves. However, in 2022, the forex reserves had decreased by $71 billion.

Additionally, India’s reserve position with the International Monetary Fund (IMF) decreased by $1 million to $4.326 billion in the week ending on May 24.

The foreign currency assets are measured in US dollar terms and also include the impact of fluctuations in other currencies such as the euro, British pound, and Japanese yen held in the forex reserves.

Regarding the Indian Rupee, it closed lower by 13 paise at 83.42 against the US dollar on Friday. This decline could be attributed to volatile domestic stock markets and month-end US dollar demand.

At the interbank foreign exchange market, the Indian rupee opened at 83.25 and fluctuated between an intra-day high of 83.23 and a low of 83.49.