India's forex reserves drop by $8.31 bn, as RBI tries to break Rupee's fall

As the US dollar rises due to the speculation that the Federal Reserve will continue to tighten repo rates, it has bogged down the Indian Rupee. The need to tackle a free fall in the value of the Rupee, was bound to trigger a sell off of foreign currency by the Reserve Bank of India. This may have triggered a $8.31 billion in India's foreign exchange reserves for the week that ended on February 10.

After rising for three weeks, forex reserves had started dropping from the week that ended on February 3. This has taken the reserves down to $566.94 billion, of which $500.59 billion are foreign currencies, down $7.11 billion from the previous week. At the same time gold reserves lost $919 million, to hit $42.86 billion.

Special drawing rights of $18.35 billion are also included in the forex reserves. These SDRs are monetary reserve currencies created by the International monetary funds, as alternatives to gold and dollars as assets for settling cross border accounts. The rise of forex reserves between October 2022 and January 2023, allowed the RBI to spend foreign assets for tackling the Rupee's fall, which was lesser than other Asian currencies.

Despite the depriciation, RBI governor Shaktikanta Das has called the Rupee's performance impressive in the face of volatility.