New Delhi: India’s foreign exchange reserves experienced a notable dip of USD 2.795 billion, settling at USD 616.143 billion for the week ending January 19, 2023. The central bank’s weekly statistical data shed light on a decline in the nation’s foreign currency assets (FCA), the largest component of its forex reserves, which decreased by USD 2.653 billion to USD 545.855 billion during the same week.
Gold reserves also witnessed a decrease of USD 34 million, resting at USD 47.212 billion. Despite this downturn, the RBI has bolstered its foreign exchange kitty by approximately USD 58 billion in the calendar year 2023. This stands in contrast to the cumulative slump of USD 71 billion in India’s forex reserves throughout 2022.
Foreign exchange reserves, often denoted as forex reserves or FX reserves, constitute assets held by a country’s central bank or monetary authority. These reserves are typically held in major currencies, with a primary focus on the US Dollar and, to a lesser extent, the Euro, Japanese Yen, and Pound Sterling.
In October 2021, India’s foreign exchange reserves reached an all-time high of around USD 645 billion. While the subsequent decline has been marginal in cumulative terms, factors contributing to this trend include the increased cost of imported goods in 2022. Additionally, the relative reduction in forex reserves may be linked to periodic interventions by the RBI in the market. The central bank, in its efforts to curb the uneven depreciation of the rupee against a strengthening US dollar, engages in market interventions, including the selling of dollars.
The RBI maintains a vigilant stance on foreign exchange markets, intervening when necessary to ensure orderly market conditions and prevent excessive volatility in the exchange rate. These interventions are not tied to pre-determined target levels or bands, emphasizing the central bank’s commitment to maintaining stability in the forex market.
