Forex Reserves Down For Second Week Straight At $589.14 Billion: RBI Data

According to the RBI, for the week ended May 26, the foreign currency assets, a major component of the reserves, declined by $4.014 billion to $520.931 billion

The country's foreign exchange (Forex) reserves declined by $4.339 billion to $589.138 billion for the week ending May 26, marking the second consecutive weekly drop, according to the Reserve Bank of India data published on Friday. In the previous reporting week, the reserves had decreased by $6.052 billion to $593.477 billion.

According to the Weekly Statistical Supplement released by the RBI on Friday, for the week ended May 26, the foreign currency assets, a major component of the reserves, declined by $4.014 billion to $520.931 billion. 

These foreign currency assets are valued in dollars and 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.

The country's reserves of foreign currency hit an all-time high of $645 billion in October 2021. The reserves have been decreasing as the central bank has utilised its funds to support the rupee against pressure from international events. 

During the reporting week, the country's Gold reserves dropped by $225 million to $44.902 billion, the RBI data showed.

The Special Drawing Rights (SDRs) also declined by $84 million to $18.192 billion. The country's reserve position with the IMF was down by $17 million to $5.113 billion in the reporting week, the data showed.

Forex reserves are essential assets maintained in foreign currencies by the central bank. They frequently support the exchange rate and have an impact on monetary policy. The RBI intervenes in the spot and forwards markets to stop the rupee from making unpredictable movements that have an impact on the overall reserves position. Forex changes also occur from valuation gains or losses. 

Meanwhile, on Friday the rupee appreciated by 9 paise to 82.31 (provisional) against the US dollar supported by broad dollar weakness and a positive trend in domestic equities.