India’s foreign exchange reserves fell by $1.7 billion to the lowest in over a year in the May 6 period, a week before the rupee hit new all-time lows, suggesting further erosion.
That forex reserves’ fall in recent months is led by persistent capital outflows and the rupee’s weakness driven by the dollar’s broad surge.
Russia’s attack on Ukraine and the resultant Western sanctions, in turn, have disrupted supply chains further – leading to a surge in commodity prices and runaway inflation globally.
The greenback’s rise has been led by expectations of a very aggressive US Federal Reserve’s monetary policy path to combat multi-decade high inflation and the RBI’s intervention through dollar sales by Indian state-run banks to shore up the rupee.
In the latest data for the May 6 ending week, the country’s FX reserves fell by $1.744 billion to $595.954 billion, marking the ninth consecutive week of declines and the lowest since late March 2021, according to the Reserve Bank of India’s weekly statistical supplement.
That data is for a week before the rupee repeatedly hits fresh record lows.
Indeed, the rupee on May 9, Monday, closed at a record low at that time of 77.44 against the dollar. It breached 77.50 per dollar at different times to repeatedly break its lifetime intra-day lows.
On Thursday, the currency ended at a new all-time low of 77.50 after hitting a fresh intra-day weak level of 77.63 against the American currency.
While the rupee recovered a bit on Friday to end at 77.31 as the RBI intervened in the open market to stem the currency’s losses, it suggests further declines in FX reserves.
Sources told NDTV that the central bank has been participating in the market to shore up the rupee as and when the currency has fallen to fresh lows and added the RBI will continue to do so, albeit to control the rupee’s “jerky movements.”