India's forex reserves slide for 4th straight week in the shadow of US Fed rate hike

India's forex reserves slide for 4th straight week in the shadow of US Fed rate hike

With respite from inflation in sight, US Fed may increase rates, triggering more pressure for the Rupee and forex reserves a well.

FPJ Web DeskUpdated: Friday, March 03, 2023, 06:04 PM IST
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NikolayFrolochkin

The Indian Rupee has delivered a positive performance against the US dollar to drop below 82 against the global currency. But the pressure on the domestic currency amidst anticipation of a Federal Reserve rate hike, had triggered a sell off of foreign assets by the Reserve Bank of India. This probably led to India's forex reserves tumbling further by $325 million to hit $560.94 billion in the week that ended on February 24.

Less intense than previous drop

But the fall is lower than the $5.68 billion drop in foreign exchange reserves in the week before that. Foreign currencies account for a bulk of the forex reserves at $495.90 billion, and went down by $166 million. Gold reserves also slipped by $66 million, to hit $41.75 billion, as RBI has started selling precious metals to make up for revenue shortfall.

US rate hike expected to increase pressure

With this, the foreign exchange reserves for India have dropped for four straight weeks, and the Rupee's recovery might provide hope for appreciation in the following week. But with respite from inflation in sight, US Fed may increase rates, triggering more pressure for the Rupee and forex reserves a well.

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