India's foreign exchange reserves have continued their downward trajectory, falling for the third consecutive week according to the latest data released by the Reserve Bank of India. The country's forex kitty decreased by $2.699 billion to reach $687.034 billion during the week that ended on November 7.
Steady Decline in Foreign Exchange Reserves
The recent drop follows a significant decline of $5.623 billion in the previous week, when reserves fell to $689.733 billion. This pattern indicates a consistent downward trend in India's foreign exchange holdings, which had been maintaining strong levels throughout most of the year.
The latest figures released by the RBI on Friday show that the decline has been primarily driven by reductions across multiple components of the reserves portfolio. The central bank's data reveals a comprehensive picture of the changing dynamics in the country's foreign asset holdings.
Breakdown of Reserve Components
Foreign currency assets (FCA), which represent the largest portion of the total reserves, experienced a substantial decrease of $2.454 billion during the week. This brought the FCA value down to $562.137 billion. It's important to note that foreign currency assets also reflect valuation changes due to currency movements in major global currencies including the euro, British pound, and Japanese yen against the US dollar.
Gold reserves, another significant component of India's forex holdings, also saw a reduction during the week. The value of gold reserves decreased by $195 million to settle at $101.531 billion. This movement reflects changes in both the quantity of gold holdings and fluctuations in international gold prices.
Other Reserve Components Show Mixed Movement
Special Drawing Rights (SDRs), which are international reserve assets created by the International Monetary Fund, slipped by $51 million to $18.594 billion. SDRs represent potential claims on the freely usable currencies of IMF members and serve as a supplement to existing reserve assets.
Meanwhile, India's reserve position with the International Monetary Fund remained unchanged at $4.772 billion during the week. This stability in the IMF reserve position indicates that no significant transactions occurred with the international financial institution during the reporting period.
The consecutive declines in foreign exchange reserves come at a time when global financial markets are experiencing volatility due to various economic factors. The RBI typically intervenes in currency markets to prevent excessive volatility in the rupee's value, which can impact the level of reserves.
Despite the recent decreases, India's foreign exchange reserves remain at healthy levels, providing substantial buffer against external economic shocks. The reserves continue to be among the largest held by countries worldwide, offering significant import coverage and supporting the country's external sector stability.
