New Delhi: For the week ending October 21, India’s FX reserves fell $3.8 billion to $524.5 billion, according to Reserve Bank of India figures issued on Friday. Since July 2020, reserves have dropped to their lowest levels. Reserves have decreased by $115 billion since last year.
Foreign currency assets, which saw a drop of $3.5 billion to $465 billion, are the main cause of the loss. Compared to October 14, the central bank’s gold holdings lost $2.47 billion in value. 7.1% of India’s total foreign exchange holdings are in the form of gold.
To stop a sharp devaluation, the RBI has started selling rupees. Due to a stronger US dollar outside and persistent outflows of foreign funds, the rupee lost 6 paisas on October 21 to start at a record low of 83.06.
On October 27, the rupee and government bonds rose as rumours that the Federal Reserve might decrease the rate of rate hikes arose from disappointing US economic statistics. The local currency was settled at 82.50 to the dollar, down from 82.73 on Tuesday.
The Fed has increased interest rates by 300 basis points so far in 2022 in an effort to lower US inflation, which has been stuck above 40-year highs for many months. The US rate increases have caused the currency to surge in strength and US bond yields to rise, which has diminished the appeal of assets in emerging economies like India.