Lagatar24 Desk
New Delhi, June 18: India’s foreign exchange reserves declined by $4.6 billion in the most recent reported week, dropping below $600 billion after gaining marginally in prior weeks following a $38 billion drop since Russia invaded Ukraine.
According to the Reserve Bank of India’s weekly supplementary statistics, the country’s foreign exchange reserves fell to $596.458 billion in the week ended June 10 from $601.957 the previous week.
The flight of capital from emerging nations to the perceived safety of US assets as a result of the Russia-Ukraine conflict, as well as the central banks’ response, has weighed on Indian financial assets.
Flight-to-safety trades have strengthened bets in favour of the dollar, in addition to the interest rate difference play. Indeed, the dollar has dominated major currencies as a result of the US Federal Reserve’s vigorous tightening of monetary policy, which has pushed the rupee to levels not seen since the battle on Europe’s periphery began late in February.
The rupee originally hit 77 per dollar in March and has since dropped further, breaking another record low of 78 per dollar just a few days ago.
Since the Ukraine conflict, the country’s import war chest has diminished due to the currency’s depreciation and a widening trade deficit due to increasing energy and commodity costs across the board.
According to the latest RBI data, the drop in forex reserves during the week ending June 10 was owing to a drop in Foreign Current Assets (FCAs), a major component of the overall reserves.
Due to trade movements in the euro, pound, and yen held by the RBI as foreign exchange reserves, FCAs fell by $4.535 billion to $532.244 billion in the week ending June 10.
Gold reserves dipped by $1 million to $40.842 billion, while the International Monetary Fund’s Special Drawing Rights (SDRs) fell by $23 million to $18.388 billion.
The country’s reserve position with the IMF declined by $40 million to $4.985 billion during the reporting week.
