India's Forex Reserves Fall $8.6 Billion To $726 Billion As RBI Defends Rupee

India's foreign exchange reserves dropped $8.6 billion to $726 billion during the week ended Oct 9, marking their fifth consecutive weekly decline as the Reserve Bank of India (RBI) intervened to stabilise the rupee.

The latest fall took the cumulative decline over five weeks to approximately $59.7 billion.

Forex reserves had reached a record $785.71 billion on Sept 4, supported by foreign inflows following the RBI's introduction of a concessional swap window in June.

The decline comes amid pressure from elevated crude oil prices, foreign portfolio investment outflows and sustained demand for US dollars.

RBI Dollar Sales Reduce Forex Reserves

The rupee strengthened on Friday, closing at 94.96 against the dollar, compared with 95.06 in the previous session.

It marked the currency's strongest closing level since Sept 8.

The rupee gained 1.9% during the week, its best weekly performance in seven months, after approaching a record low of 96.96 earlier in October.

Foreign currency assets declined $7.14 billion to $597.61 billion, while gold reserves fell $1.32 billion to $105.09 billion.

Special Drawing Rights decreased $109 million to $18.55 billion.

India's reserve position with the International Monetary Fund also slipped $10 million to $4.78 billion.

Measures To Ease Pressure On Rupee

The central bank has introduced measures aimed at reducing speculative pressure on the domestic currency.

On Oct 10, the RBI announced a dedicated dollar window for state-owned oil marketing companies to redirect their foreign exchange requirements away from the spot market.

It also tightened foreign exchange derivatives regulations and introduced a risk reserve requirement for certain transactions.

These measures have helped ease immediate market pressure but cannot eliminate underlying dollar demand.

A private bank treasury head said the RBI continued selling dollars during the current week.

The official indicated that sustained rupee stability would depend partly on lower crude oil prices and reduced dollar pressure.