Mumbai: India’s currency reserves on Friday posted a weekly decline for the fourth time in a row at a time when the rupee has been under pressure against the dollar.
Data from the Reserve Bank of India (RBI) showed that foreign exchange reserves fell $ 1.2 billion per week to $ 417.7 billion on May 11.
Foreign exchange reserves have been falling after reaching a record high of $ 426 billion on April 13, 2018.
Forex traders are attributing the fall of the foreign exchange reserve to the dollar sales of the RBI.
The stated position of the central bank has been that it intervenes in the currency market to limit excessive volatility. “The intervention of RBI in the currency market to stop the further depreciation in the rupee has led to a fall in foreign exchange reserves, but there is also the impact of the revaluation of foreign currency assets that are part of the reserves” said Sajal Gupta, head of forex and fees at Edelweiss Securities Ltd.
On Friday, the rupee ended at 68.01 against the US dollar, 0.45% below its previous close of 67.70. Earlier this week, it had weakened beyond the 68 mark for the first time since January 2017.
The recent depreciation in the rupee has intensified mainly due to a sharp increase in international crude oil prices, which may weaken the macroeconomic fundamentals of India. This is because India is a net importer of crude oil and a rise in prices can affect the import bill.
Brent crude has surpassed $ 80 a barrel for the first time since 2014.
The rupee along with other Asian currencies is under pressure of force in dollars worldwide.
A weakness of the rupee along with fears of political instability, following the recently concluded Karnataka elections, is contributing to the outflow of local stocks and bonds markets, traders said.
So far this year, the rupee has weakened by more than 6%, while foreign investors have bought $ 660.20 million and sold $ 3.47 billion in stock and debt markets, respectively.