Experts said on Saturday that a strong US dollar along with the attempt of the central bank to control the volatility of the value of rupee has depleted the forex kitty reserves of India by about $750.2 million.
In total, the Forex reserves on November 27 were at $351.61 billion.
From $3522.36 billion during the end of the week of November 20, the Forex Kitty of India decreased by approximately $149.7 million.
Anindya Banergee, the associate vice president for currency derivatives with Kotak Securities, said during an interview, “The dollar’s appreciation in the week under review against major global currencies like pound sterling, euro and yen led to Forex reserves depletion.”
About 20 to 25% of the major non-global currencies are comprised of the foreign reserves of India. The movements of each of these currencies against the dollar affect the total value of reserves.
“The dollar appreciation has taken place on the back of the heightened chances of a US rate hike. The US dollar had appreciated by close to one per cent during the week under review,” says Banerjee.
The USD currency is becoming stronger than the currencies of emerging markets, gold, and other asset classes before the US rate hike.
Furthermore, the weekly statistical report of the RBI shows that the foreign currency assets (FCA) decreased by $726.2 million to $327.66 billion in the week that is being studied. India’s Forex reserves comprise the largest component of the FCA. It includes US dollars, securities and bonds, as well as major non-dollar currencies.
During the statistical report of RBI, they said, “The FCA expressed in US dollar terms, include the effect of appreciation or depreciation of non-US currencies such as the pound setting, euro and yen held in reserve.”
RBI is comfortable with the rupee ranging from 65-62 to the US dollar. As of late, the rupee has been decreasing because of the major outflows of foreign funds.