India’s foreign exchange reserves fell by $ 1.7 billion to their lowest level in more than a year in May 6, a week before the rupee hit an all -time low, suggesting further erosion.
The fall in forex reserves in recent months has been led by continued capital outflows and the weakness of the rupee driven by the dollar’s broad surge.
Russia’s attack on Ukraine and the consequences of Western sanctions, in turn, have further disrupted the supply chain – leading to a spike in commodity prices and continued inflation around the world.
The rise of the dollar has been led by expectations of a very aggressive US Federal Reserve monetary policy path to combat decades-high high inflation and RBI intervention through dollar sales by Indian government banks to support the rupee.
In the latest data for the week ended May 6, the country’s FX reserves fell by $ 1.744 billion to $ 595.954 billion, marking the ninth consecutive week decline and the lowest since late March 2021, according to additional Reserve Bank of India weekly statistics.
The data was for a week before the rupee repeatedly hit a new record low.
Indeed, the rupee on May 9, Monday, closed at a record low at the time of 77.44 against the dollar. It hit 77.50 per dollar at different times to repeatedly break its lifetime intra-day lows.
On Thursday, the currency ended at a new all-time low of 77.50 after hitting a new intra-day weakness of 77.63 against the American currency.
While the rupee recovered slightly on Friday to end at 77.31 when the RBI intervened in the open market to curb currency losses, it suggested a further decline in FX reserves.
Sources told AGRASMARTCITY that the central bank has participated in the market to support the rupee when and when the currency falls to new lows and added the RBI will continue to do so, even to control the “jerked movement” of the rupee.