As the Rupee is gains strength against the US dollar, most would expect lesser pressure on the Reserve Bank of India to sell off foreign assets. But even as the local currency is closer to going international, India's foreign exchange reserves have plunged in the week that ended on March 10, 2023.
Another dip after a breather as non-US currencies flow out
The $2.4 billion drop to $560 billion comes after forex reserves went up in the previous week, after a four-week slide.
Foreign currencies, which form the bulk of forex assets, went down by $2.2 billion owing to depreciation in Euro, Pound and Yen, apart from US dollar, and hit $494.86 billion.
What does the coming week look like?
With a decline in demand for gold, the yellow metal's value in India's forex reserves went down by $110 million to $41.92 billion.
As markets remain volatile following a pandemic, geopolitical tensions and a banking crisis, RBI had to spend $115 billion from the reserves to break the Rupee's fall.
But the decline in forex reserves came before the banking sector was hit by the SVB crisis, and the RBI is now expected to tighten spending with risks of the situation worsening.
