Foreign reserves grows by $1.8 bn, after two weeks of fall

After two weeks of consecutive falls due to plunging gold prices and international currency devaluations, India's foreign exchange (Forex) reserves gained $1.08 billion in the week ended August 14.

The reserves for the week under review stood at $354.43 billion after falling by $321.1 million since July 31.

For the week ended August 7, the reserves had declined by $113.5 million to $353.34 billion. The data furnished by the Reserve Bank of India (RBI), in its weekly statistical supplement showed that the foreign currency assets (FCAs) rose by $1.03 billion to $330.83 billion.

The FCA which constitutes the largest component of Forex reserves includes nearly 20-25 percent of non-dollar currencies, securities and bonds bought abroad.

The major catalyst for the earlier FCA losses was the devaluation of yuan, intended to boost Chinese exports.

China's central bank devalued yuan by two percent on August 11. This was the biggest devaluation in the Chinese currency since 1994.

The currency fell again by another two percent on August 12 panicking the world economy. The move strengthened the dollar value, which has negatively impacted major world currencies including the Indian rupee which has touched new 2-year lows recently.

The yuan has fallen by 4.6 percent till now since August 11.  At the same time, the country's gold reserves were stagnant at $18.25 billion in the week under review. The reserves had plunged by $824.2 million in the week ended July 31.

The plunge in bullion reserve value came about after the international prices steadily declined as a result of dollar gaining strength.

From a peak of $1,900 an ounce in September 2011, the spot gold price slumped to a five-year low of $1,086 an ounce on August 6, 2015.

However, the special drawing rights (SDRs) in the period under review were higher by $35.4 million to $4.05 billion.

The country's reserve position with the International Monetary Fund (IMF) was up by $11.2 million to $1.29 billion.