India's foreign exchange reserves experienced a notable dip, falling by $4.924 billion to reach $780.782 billion for the week concluding September 11. This decline follows a significant surge in the prior week when reserves had jumped by a record $44.903 billion to hit an all-time high of $785.706 billion. The recent decrease marks the end of what had been described as a prolonged rising streak for India's forex stockpile, influenced by a central bank capital-raising scheme.
The primary contributors to this reduction were a fall in foreign currency assets and gold reserves. Foreign currency assets, a major component of the overall reserves, decreased by $2.372 billion, settling at $645.796 billion. Expressed in dollar terms, these assets account for the appreciation or depreciation of non-U.S. currencies like the euro, pound, and yen held within the reserves. Concurrently, the value of gold reserves also saw a substantial drop of $2.591 billion, bringing them to $111.225 billion.
Despite the overall decline, some components of the reserves showed slight increases. Special Drawing Rights (SDRs) rose by $39 million to $18.845 billion, and India's reserve position with the International Monetary Fund (IMF) remained stable, showing no change at $4.916 billion in the reporting week. The earlier record high was attributed to massive inflows, particularly from the Reserve Bank of India's (RBI) special dollar swap scheme launched in June, which drew in $136.38 billion. However, analysts point out that while these schemes boost reserve numbers, the funds often sit on the RBI's books rather than directly impacting the open market, limiting their immediate effect on the rupee's strength.
