India's foreign exchange reserves recorded their steepest weekly decline in months, falling by $9.985 billion to $671.625 billion in the week ended June 12, primarily due to a sharp drop in gold reserves, according to data released by the Reserve Bank of India (RBI) on Friday.
The country's forex reserves had declined by $711 million in the previous reporting week to $681.610 billion, as reported by PTI.
Despite the overall fall, foreign currency assets (FCAs), which constitute the largest component of forex reserves, increased by $846 million to $544.290 billion during the reporting week. Expressed in dollar terms, FCAs include the impact of movements in non-US currencies such as the euro, pound sterling, and Japanese yen held in the reserves.
Gold reserves, however, witnessed a sharp decline of $10.754 billion to $103.821 billion, dragging down the overall reserves position significantly.
The RBI data also showed that Special Drawing Rights (SDRs) fell by $66 million to $18.699 billion. India's reserve position with the International Monetary Fund (IMF) declined by $11 million to $4.815 billion during the week, according to the central bank.
This development underscores the volatility in global gold prices and currency markets. Analysts attribute the drop in gold reserves to valuation changes rather than physical sales, as gold prices corrected during the period. The increase in FCAs suggests that the RBI may have intervened to support the rupee or diversified its holdings.
The overall decline in forex reserves, while significant, still leaves India with a healthy buffer to manage external shocks. Forex reserves are crucial for maintaining confidence in the economy and ensuring stability in the foreign exchange market.
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