India's forex reserve down by $5.68 bn as rate hike expectation strengthens US dollar

The Rupee has been falling consistently as it is expected to float between the Rs 81 and Rs 84 mark against the US Dollar till June. To keep the Rupee steady against a stronger dollar amidst expectations of another US rate hike, Reserve Bank of India has to sell off foreign assets. This has led to a further decline in foreign exchange reserves, which went down by $5.68 billion in the week that ended on February 17.

This dip in foreign exchange reserves is less than the 8.3 per cent depletion in the week before that. That was the biggest decline in forex reserves in the past 11 months, after it fell in 2022 following a rise for three years in a row. The reserve currently stands at $561.27 billion, compared to an all time high of $645 billion in October 2021.

Foreign currency reserves were the worst hit, falling $4.52 billion to $496.07 billion, while gold depleted by $1.04 billion to $41.82 billion. The US Federal Reserve has remained relentless with its repo rate hikes, and is expected to increase interest further to reduce inflation till it hits 2 per cent. This has added to the US Dollar's strength against other currencies.