India’s foreign currency assets, the biggest component of the forex reserves, declined by $2.21 billion to $525.4 billion. The changes in foreign currency assets, expressed in dollar terms, include the effects of appreciation or depreciation of other currencies held in the RBI’s reserves.
India’s gold reserves dipped by $745 million, taking the overall levels to $44.3 billion. Meanwhile, SDRs were up by $85 million, to $18.33 billion.
In October 2021, the country’s foreign exchange reserves touched an all-time high of about $645 billion. Much of the decline since then can be attributed to a rise in the cost of imported goods in 2022.
Also, the forex reserves had fallen largely because of the RBI’s intervention in the market to defend the depreciating rupee against a surging US dollar. Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the rupee.
The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.
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