Forex reserves pick up by $2.734 bln after three weekly falls

India’s foreign exchange (forex) reserves erased a three-weeks declining spree and picked up momentum in the week ending June 24. The latest weekly statistical data of RBI shows all components in forex reserves climbed with foreign currency assets rising massively.

Data from RBI shows that India’s total forex reserves climbed by $2.734 billion to $593.323 billion in the week ending June 24, 2022 – compared to $590.588 billion recorded in the previous week.

India’s forex reserves plunged by $5.870 billion in the week ending June 17; while the decline was $4.599 billion in the week ending June 10; and a drop of $306 million in the week ending June 3. In the week ending May 27, 2022, reserves had jumped by $3.854 billion to $601.363 billion.

In the week ending June 24, foreign currency assets (FCA) increased by $2.334 billion to $529.216 billion compared to the previous week’s $526.882 billion. FCA is the major component in the forex reserves.

Further, gold reserves soared by $342 million to $40.926 billion in the week ending June 24 over the previous week. Also, SDRs surged by $55 million over the previous week to $18.210 billion. The reserve position in the IMF stood at $4.970 billion up to $3 million in the week under review.

On Friday, the rupee touched a new all-time low against the dollar index, however, slightly recovered during the closing hours.

At the interbank forex market, the local currency closed at 78.94 per dollar higher by 12 paise. The rupee opened at 78.99 but touched a fresh all-time low of 79.12 against the greenback before correcting. The performance comes during the time government decided to hike the import duty on gold to 15% From 10.75% to curb imports. There is a significant rise in gold import in the past two months and it is putting pressure on the country’s current account deficit amidst a weak rupee.

Manish Jeloka, Co-head of Products & Solutions, Sanctum Wealth said, “FII selling in the Equity Markets, Higher Imports due to increase in crude prices, Higher Commodity prices and Importers now coming in to hedge, are the factors that contributed to the INR being at record lows.”

Last week, in an interview, RBI governor Shaktikanta Das spoke about rupee depreciation. He pointed out two things, by saying, “first, our forex reserves are quite strong. Our forex reserves are almost two-and-a-half times that of our short-term foreign debt in terms of residual maturity. Second, our macro fundamentals are far better, and India is in a better place than many other economies. Further, India is witnessing revival of growth, which is also steady.”

Going forward, Jeloka said, “For USD-INR 80 is a big psychological level. There appears to be Central Bank intervention to help a soft landing. INR is expected to continue to outperform most other emerging market currencies. This is because most of the factors like higher crude and commodity prices affect everyone.”

NSDL data shows that overall, FPIs outflow stands at 2,28,101 crore (including equities, debt, debt-VRR, and hybrid market) so far in 2022, till July 1.

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