The country’s foreign exchange reserves fell $5.1 billion in the week ended October 12. This is the highest dip in seven years, according to data released by the Reserve Bank of India (RBI). Total forex reserves declined from $399.6 billion in the previous week to $394.46 billion on October 12. This is also the lowest foreign exchange level since over a year, caused mainly because of a fall in foreign currency assets.
According to the RBI’s latest monthly bulletin, the central bank sold $1.28 trillion worth of US dollars from end March to August. Total foreign reserves have fallen by over $30 billion since March 2018 with foreign currency assets sliding by $29.4 billion during the same period, the RBI’s data showed.
Moreover, market analysts say that the fall in reserves is mainly on account of foreign institutions pulling out their investments in India, particularly from the debt market.
The rupee has been facing intense selling pressure for more than a month now. It depreciated by over 12 per cent this year owing to several factors like rising bond yields on government securities, rising crude oil prices which increases the trade deficit, and concerns surrounding widening fiscal expenditure given the run up to the general elections slated for next year.
On Friday the exchange rate closed at Rs 73.32 against the dollar.