InvestorQ : Why are the forex reserves falling consistently on a weekly basis in the last few months?
sara Kunju made post

Why are the forex reserves falling consistently on a weekly basis in the last few months?

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Mary Joseph answered.
1 month ago
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The latest weekly reported showed the sharpest fall in forex reserves with the forex chest falling by $11.173 billion in a single week to a level of $606.475 billion. This marks the fourth straight week of weekly dip in forex reserves as the Indian rupee has faltered and the RBI has rushed in to support by selling dollars. This has depleted the RBI forex reserves. The hawkishness of the Fed is only worsening the outflows for the RBI.

In the previous week, the forex reserves had fallen by $2.03 billion to $617.648 billion. Over the last 4 weeks, India’s forex reserves have depleted by nearly $27 billion. in the prior week that ended on March 25. The previous worst fall in reserves was just 2 weeks back when the reserves had fallen by $9.6 billion. Normally, when the rupee is weakening beyond a point, the RBI intervenes to strengthen the rupee by selling dollars in the open market.

India's external current account deteriorated in the Dec-21 quarter with the current account deficit touching 2.7% of the GDP. This was largely on account o fa higher than expected trade deficit. Unfortunately, the deficit now is being no longer offset completely by capital inflows. Barclays has already made a point that with rising current account deficits, the overall weakness in the rupee could continue so the dollar intervention could heighten.

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