Indian foreign exchange (Forex) reserves fell to $535.252B for the week ending August 14, 2020, as per data released by the Reserve Bank of India (RBI) on August 21, 2020.
The decline of over $2.939B in the forex reserves is significant, considering its performance in the week ended August 7, 2020, when it had reached a record high of $538.191B.
A notable fall in the country’s foreign currency assets (FCA), which make up the overall reserves, is to be blamed for this decline. The RBI data showed the FCA value dropping by $743M to $491.550B from $ 492.29B a week ago.
Even though FCA are represented in US dollars, there are a couple of factors that might affect its value, such as appreciation and depreciation of other foreign currencies, including the pound, euro, and yen.
Forex reserves help the RBI to create a monetary policy for India and regulate the Indian rupee. It is typically made of external reserves such as gold, FCA, and SDR.
Similarly, the country’s gold reserves fell by $2.19B to $37.595B from $ 39.79B in the previous week.
Furthermore, the country’s special drawing rights (SDR) witnessed a decline of $2M to $1.479B, while its reserves position with the International Monetary Fund (IMF) dropped by $4M to $4.628B in the week reported.
However, this year’s growth in India’s forex reserves has been tremendous as it crossed the historical half-a-trillion mark ($501.703B) in the week ended June 5, 2020, thanks to an increase of $8.223B.