India’s foreign exchange reserves has fallen for the second consecutive week. According to the latest Reserve Bank of India data, India’s forex reserves stood at $589.138 billion, after falling $4.339 billion in the week ending on May 26.
In the week ending on May 19, India’s foreign exchange reserves declined by $6.052 billion to $593.477 billion. This was the biggest weekly fall in the past three months.
Interestingly, India’s foreign exchange reserves touched approximately $600 billion around May 21-22. It is to be noted that in October 2021, the country’s forex reserves had reached an all-time high of $645 billion.
The recent decline in India’s foreign exchange reserves shows that the central bank has been intervening to shore up the Indian rupee, which ended at 82.3 on Friday.
Due to stronger US dollar, the rupee declined by 1.1 percent in the month of May. This was the biggest one-month drop in the Indian rupee this year.
The Indian currency is likely to breach the 83 rupee per dollar mark due to a stronger dollar, reports said. However, a Bloomberg report said that the rupee is unlikely to drop below 83 as the US dollar has started showing signs of weakness.
The latest forex figures come just days before India’s central bank is expected to announce its latest monetary policy.
Reports suggest that the RBI will maintain the interest rate at 6.5 percent during its upcoming June 8 announcement, considering the easing of retail inflation in April and the potential for further decline. However, with the Indian rupee hovering near the 83 per dollar mark, the RBI may be forced to hike the interest rate to support the currency.
After the last monetary policy meeting in April, the RBI had paused its rate hike cycle and stayed with the 6.5 percent repo rate. Prior to that the central bank had cumulatively hiked the rates by 2.5 percent since May 2022 in a bid to contain inflation.
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