India’s forex reserves dip by $9.64 billion, the biggest drop in 2 years

India’s foreign exchange (forex) reserves declined by $9.646 billion to $622.275 billion in the week ended March 11, the sharpest decline in nearly two years, as the Reserve Bank of India (RBI) heavily sold dollars to prevent the slide in the value of rupee.

According to the RBI’s weekly statistical supplement, the foreign currency assets, which is the biggest component of the forex reserves, slumped by $11.108 billion to $554.359 billion during the week under review.

Expressed in US dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-dollar currencies like Euro, UK’s Pound Sterling and Japanese Yen held in the foreign exchange reserves.

This sharp decline in the country’s foreign currency assets coincides with the week during which the rupee hit an all-time low.

The Indian rupee plunged to a record low of 77.02 against a US dollar on March 7.

According to the market analysts, the RBI intervened in the currency markets by selling dollars. The central bank is estimated to have sold $1 billion a day during the week to prevent further weakness in the Indian currency.

The decline in the forex reserves during the week ended March 11 this year was the sharpest in nearly two years. The country’s forex reserves had slipped by $11.9 billion during the week ended March 20, 2020. The country’s forex reserves had touched an all-time high of $642.453 billion in the week ended September 3, 2021.

The value of India’s Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) declined by $53 million to $18.928 billion. India’s reserve position in the IMF dropped by $7 million to $5.146 billion during the week ended March 11, the RBI data showed.

However, the value of gold reserves rose sharply in line with the sharp appreciation in the gold price during the week. The value of gold reserves jumped by $1.522 billion to $43.842 billion during the week under review.

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