India’s foreign exchange reserves continued to decline for the second consecutive week, reflecting pressure on the rupee amid ongoing geopolitical uncertainty and central bank intervention in the currency market. According to data released by the Reserve Bank of India (RBI) on Friday, the country’s forex reserves dropped by $7.511 billion to $681.384 billion for the week ended May 22.
The decline follows a sharp fall of $8.094 billion recorded in the previous reporting week, when reserves had slipped to $688.894 billion.
India’s forex kitty had earlier climbed to a historic peak of $728.494 billion during the week ended February 27. However, reserves have since come under pressure following tensions in the Middle East, which prompted the RBI to actively intervene in the foreign exchange market by selling dollars to stabilise the rupee.
Foreign Currency Assets See Fresh Decline
Foreign currency assets (FCAs), which form the largest portion of India’s forex reserves, witnessed a significant reduction during the reporting period.
RBI data showed FCAs declined by $2.872 billion to $543.032 billion.
These assets are maintained in multiple foreign currencies and are expressed in dollar terms. Their valuation is influenced not only by RBI intervention but also by fluctuations in global currencies such as the euro, pound sterling, and Japanese yen.
The recent volatility in global markets and movement in major currencies have added further pressure on reserve valuation.
Gold Reserves Register Sharp Fall
India’s gold reserves also recorded a notable decline during the week under review.
The value of gold holdings fell by $4.53 billion to $114.786 billion, contributing significantly to the overall drop in reserves.
Apart from gold and foreign currency assets, the country’s Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) also edged lower. SDRs declined by $77 million to $18.748 billion.
Meanwhile, India’s reserve position with the IMF slipped by $33 million to $4.818 billion, according to the central bank’s latest figures.
(With Agency Inputs)
