India’s forex reserves fell to a two-year low in the week ended October 14 as the Reserve Bank of India hedged against a sharp depreciation of the rupee against the dollar.
According to RBI’s weekly statistical supplementary data, in the week ended October 14, the country’s foreign exchange reserves fell by $4.5 billion to $528.367 billion, from $532.868 billion in the previous week, when they stood at an astonishing $0.2 billion. had increased.
Foreign exchange reserves have fallen by more than $100 billion since Russia invaded Ukraine in late February, with the country’s import cover down about $114 billion from its peak at the end of October last year.
India’s forex reserves have fallen in 27 out of 34 weeks since the end of February.
The war on the edge of Europe has further exacerbated inflation. The resulting aggressive rate hike by the US Federal Reserve prompted investors to abandon riskier assets and shelter in dollar-denominated assets.
Safe-haven flows from emerging economies have hurt the rupee, with the domestic currency depreciating nearly 12 per cent this year and falling from around 73 per dollar at the start of the year to 83 this week.
The aggressive rate hike trajectory of the US Federal Reserve, rising domestic current and trade account deficits, and foreign investors continuing to sell riskier assets on concerns of a global recession are some of the problems the rupee is facing.
The RBI is intervening in both the spot and future markets to protect the rupee from a steep fall.
The rupee fell flat against the Qing dollar on Friday, even as Treasury yields rose as the Indian central bank stepped in and brushed off any sharp losses after the currency crashed to a new all-time low in the previous session. limited.
“Rupee was in the range of 82.60 to 82.90 per dollar after opening weak on higher US yields. But RBI was active throughout the day to ensure that it does not weaken further. US 10-year yield has been over 4.25 per cent – 14-year high – keeping the dollar bidding well against most Asian currencies, which has been weak for the greenback,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors.
The recent trend and the rupee’s fall to a new record low of $83.29 this week suggests further erosion in the country’s FX war chest as calls from the RBI to step in and sell the dollar to limit any damage to the domestic currency. are supposed to.