Forex Reserves Decrease for Sixth Consecutive Week to $625.87 Billion, Continuing at a 10-Month Low

India's foreign exchange reserves have experienced a notable decline, dropping for the sixth consecutive week and reaching $625.87 billion for the week ending January 10, 2025. This situation is highlighted in the recent data released by the Reserve Bank of India (RBI) on January 17, 2025.

Impact of Central-Bank Intervention

The decrease of $8.7 billion in the forex reserves over the preceding week, where reserves stood at $634.59 billion, is largely attributed to vigorous intervention by the central bank in the currency market. The RBI's efforts are aimed at supporting the Indian rupee, which has been facing pressure due to the strength of the US dollar.

To mitigate volatility in the currency market, the RBI typically sells dollars from its reserves, particularly when the rupee shows signs of weakness. Such interventions are crucial for maintaining stability in the foreign exchange market.

Rupee Performance Against the Dollar

As of January 10, the rupee has closed weaker against the US dollar for two consecutive days, primarily due to a rebound in the dollar index. On the last reporting day, the Indian currency settled at 86.61 against the greenback, reflecting a decline of six paise from the previous session.

Foreign Currency Assets and Gold Reserves

Data indicates that for the same week, the foreign currency assets—a key component of the total reserves—dipped to $536.01 billion, down from $545.48 billion the previous week. This measure includes the value impact of non-US currencies such as the euro, pound, and yen.

In contrast, gold reserves saw a slight increase, rising to $67.88 billion from $67.09 billion in the week ending January 3. This suggests a steady interest in maintaining gold assets amid fluctuating forex reserves.

The current situation illustrates the ongoing challenges facing India's foreign exchange reserves, as the RBI continues its strategic maneuvers to stabilize the rupee amidst external economic pressures.

Forex, Reserves, Decline