India’s forex kitty falls for 3rd week in a row

Mumbai, Sep 29 India’s foreign exchange reserves declined for a third consecutive week to a four-month low of $590.7 billion as of September 22, data released by the RBI on Friday showed.

The forex kitty fell by as much as $2.3 billion during the week after having plunged by as much as $5.9 billion in the two preceding weeks.

The decline in the foreign exchange reserves is a cause for concern as the RBI uses them to curb volatility in the rupee. The central bank intervenes in the market to sell US dollars to prop up the rupee in a situation where the Indian currency falls sharply. However, if the total amount in the forex kitty declines, the RBI is left with less elbow room to intervene in the markets.

Over the last few trading sessions, the RBI has been likely selling dollars via public sector banks to prevent the rupee from falling to a record low against the dollar, according to market analysts.

For the week ended September 22, during which forex reserves fell, the rupee had risen 0.2 per cent against the dollar and traded in a range of 82.8225 and 83.2725.

Changes in foreign currency assets, expressed in dollar terms, also include the effects of appreciation or depreciation of other currencies held in the RBI’s reserves.

Besides, foreign exchange reserves include India’s Reserve Tranche position in the International Monetary Fund.

The rupee ended at 83.04 on Friday, down 0.1 per cent for the week.

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