India's foreign exchange (forex) reserves dropped by $7.273 billion to $594.888 billion for the week ended August 18, the Reserve Bank of India said on Friday. According to the RBI data, this is the largest weekly drop in over six months. In the previous reporting week that ended on August 11, forex rose by $708 million to reach $602.161 billion. 


The RBI's Weekly Statistical Supplement also showed that Foreign Currency Assets (FCAs) decreased by $6.613 billion to $527.786 billion.  Valued in dollars, the foreign currency assets take into account the impact of changes in value for currencies such as the euro, pound, and yen held in the foreign exchange reserves. Foreign Currency Assets (FCAs) are held in diverse currencies like the US dollar, Euro, pound sterling, Australian dollar, etc.


In October 2021, the country's foreign exchange reserves peaked at a historical high of $645 billion. However, these reserves have been declining since the RBI deployed its resources to cushion the rupee amid pressures from global developments



The RBI data showed that Gold reserves saw a decline of $515 million, settling at $43.824 billion. The Special Drawing Rights (SDRs) also declined by $119 million to $18.205 billion. India's reserve position with the International Monetary Fund (IMF) contracted by $25 million to reach $5.702 billion in the reporting week. 


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Forex reserves are crucial foreign currency assets held by the central bank. They help keep exchange rates stable and affect monetary policy. The RBI intervenes in spot and forward markets to curb unpredictable fluctuations in the rupee, which can influence the overall reserves. Additionally, forex variations arise from valuation gains or losses.


According to a Reuters report, during the reporting week, the rupee fell to its lowest point in 10 months, reaching 83.16 against the US dollar. As per traders, this prompted intervention from the RBI, the report said. 


By the end of the week, the currency closed at 82.6475 on Friday, a rise of over 0.5 per cent throughout the week, the report said.