India’s forex reserves fell by $1.7 billion in the May 6 period to their lowest in a year, hitting a new all-time low of the rupee a week earlier, suggesting further erosion.
The fall in forex reserves in recent months has been attributed to continued capital outflows and a weakness in the rupee driven by a broader dollar rally.
Russia’s attack on Ukraine and the resulting Western sanctions have, in turn, further disrupted supply chains – leading to increased commodity prices and increased global inflation.
The rise of the greenback has been led by a very aggressive US Federal Reserve’s monetary policy path to tackle decades of high inflation and RBI’s intervention through dollar sales by Indian state-run banks to prop up the rupee.
According to the Reserve Bank of India’s weekly statistical supplement, in the latest data for the week ended May 6, the country’s foreign exchange reserves fell by $1.744 billion to $595.954 billion, the ninth consecutive week of decline and the lowest since March 2021 .
This data is for a week when the rupee has repeatedly hit new record highs.
In fact, on Monday, May 9, the rupee had closed at a record low of 77.44 against the dollar at that time. It broke above $77.50 at different times and broke its lifetime intra-day lows repeatedly.
The currency ended at a new all-time low of 77.50 after hitting a fresh intra-day weak level of 77.63 against the US currency on Thursday.
While the rupee recovered slightly on Friday to end at 77.31 as the RBI intervened in the open market to contain currency losses, it suggests a further fall in forex reserves.
Sources told NDTV that the central bank is rushing the market to strengthen the rupee whenever the currency has hit fresh lows and added that the RBI will continue to do so though to control “jerky movements” of the rupee. For.