India’s foreign exchange reserves fell by $3.2 billion to a five-month low of $654.86 billion as of December 6, Reserve Bank of India (RBI) data showed on Friday. Reserves increased by $1.5 billion in the week of November 29 after falling by $48.3 billion in the previous eight weeks.
Changes in foreign currency assets are caused by central bank intervention in the foreign exchange market as well as appreciation or depreciation of foreign assets held in reserves. The RBI intervenes on both sides of the foreign exchange market to prevent undue volatility in the rupee.
For the week to which foreign exchange reserve data is concerned, RBI is estimated to have net sales of $6.1 billion, while revaluation gains are expected to be around $2.7 billion, said Gaur Sen Gupta, India economist at IDFC FIRST Bank. Last week, the rupee fell to its all-time low of 84.7575, hurt by weakness in the Chinese yuan and strong dollar bidding in the non-deliverable forward (NDF) market, prompting the RBI to intervene.
The currency fell 0.2% last week. The domestic unit ended Friday at 84.7875, down for a sixth straight week. It hit a record low of 84.88 earlier in the week, pressured by prolonged devaluation bias and increased demand for the US dollar in the NDF market. Foreign exchange reserves also include India’s reserve installment position with the International Monetary Fund.
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