India’s forex reserves dip by $6 bn; value of gold reserve down by $1.2 bn

Snapping two consecutive weeks of gains, India’s foreign exchange (forex) reserves slumped by $6.052 billion to $593.477 billion for the week ended May 19, dragged by a sharp drop in the value of gold reserves and foreign currency assets, the Reserve Bank of India (RBI) data showed.

As per the weekly statistical supplement released by the RBI on Friday, the country’s foreign currency assets, the biggest component of the forex reserves, dipped by $4.65 billion to $524.94 billion.

Expressed in the US dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US currencies like pound, euro and yen held in the forex reserves.

The forex reserves have declined after two consecutive weeks of gains. The country’s forex kitty had increased by $3.5 billion in the previous reporting week.

The value of gold reserves declined by $1.22 billion to $45.12 billion during the week ended May 19.

All major components of the country’s forex reserves declined during the week under review. India’s reserve position in the International Monetary Fund (IMF) declined by $35 million to $5.13 billion. The Special Drawing Rights (SDRs) fell by $137 million to $18.27 billion.

Generally, the forex reserves fall sharply when the RBI intervenes in the currency markets by selling dollars to prevent the weakness in rupee.

Earlier this week RBI Governor Shaktikanta Das defended the central bank’s intervention in the currency markets. “We had to intervene in the market because our primary focus is to maintain the stability of the Indian rupee, the stability of the exchange rate,” Das said referring to the RBI’s intervention in the currency markets, especially after the outbreak of the Russia-Ukraine war that led to outflows of money from the emerging markets.