India’s foreign exchange reserves fell $1.7 billion to their multi-year lows on May 6, a week before the rupee hit a new low, signaling further erosion.
The decline in forex reserves in recent months is fueled by continued capital outflows and the weakness of the rupee due to the broad appreciation of the dollar.
Russia’s attack on Ukraine and the ensuing Western sanctions, in turn, have further disrupted supply chains – leading to a surge in commodity prices and runaway inflation worldwide.
The dollar’s gains were led by expectations of a very aggressive stance by the US Federal Reserve’s monetary policy to combat decades-long high inflation and the intervention of the RBI through dollar sales by state-owned Indian banks to support the rupee.
According to the latest data for the week ending May 6, the country’s foreign exchange reserves fell $1.744 billion to $595.954 billion, the ninth consecutive week of declines and the lowest since the end of March 2021, according to the Reserve’s weekly statistical supplement. Bank of India.
That data is for a week before the rupee repeatedly hits new record lows.
Indeed, the rupee closed on Monday at an all-time low of 77.44 against the dollar on May 9. It crossed 77.50 per dollar at various times to repeatedly break its intra-day lows throughout its lifetime.
On Thursday, the currency ended at a new all-time low of 77.50 after hitting a new intra-day weak level of 77.63 against the US currency.
Although the rupee recovered somewhat on Friday, ending at 77.31 as the RBI intervened in the open market to contain the currency’s losses, this suggests further declines in foreign exchange reserves.
Sources told DailyExpertNews that the central bank has participated in the market to support the rupee if and when the currency has fallen to new lows, adding that the RBI will continue to do so, albeit because of the “jerky movements of the rupee.” to master.