Foreign exchange reserves decline for second consecutive week

MUMBAI: India's foreign exchange reserves witnessed a decline of $3.2 billion reaching $603.87 billion in the week ending on July 28. The depletion of foreign exchange reserves also occurred in the preceding week concluding on July 21 when they decreased by $1.9 billion to $607.03 billion.

According to the latest data from the Reserve Bank of India, foreign currency assets experienced a decrease of $2.4 billion settling at $535.33 billion. Foreign currency assets constitute the primary component of cash reserves. Although these assets are primarily denominated in dollars, fluctuations in the values of currencies such as the euro, pound and yen which are held within the foreign exchange reserves can significantly impact the value of foreign currency assets.

Gold reserves observed a decline of $710 million reaching $44.904 billion. Additionally, reserves held at the International Monetary Fund decreased by $11 million amounting to $5.185 billion. Special Drawing Rights saw a decrease of $29 million reaching $18.444 billion.

It's noteworthy that foreign exchange reserves had achieved an all-time high of $645 billion in October 2021. However, the emergence of global inflationary trends prompted central banks to implement rate hikes. In response, the Reserve Bank of India initiated the selling of dollars to safeguard the value of the rupee. Consequently, this series of events led to a substantial reduction in foreign exchange reserves.