India's Forex Reserves Drop By $2.36 Bn In One Week

According to data from the Reserve Bank of India (RBI), India's foreign exchange reserves decreased by USD 2.36 billion, reaching USD 583.53 billion by the week ending on 20 October. This comes after a preceding week that saw an increase of USD 1.15 billion, reversing a continuous decline over the previous five weeks.

Notably, the country's foreign exchange reserves had previously fallen by a substantial USD 14.166 billion, reaching a five-month low of USD 584.74 billion for the week ending on 6 October. This latest decrease in reserves raises concerns, especially considering the pivotal role these reserves play in stabilising the Indian rupee during periods of volatility.

The RBI uses these reserves to intervene in the spot and forwards markets, releasing additional dollars to prevent the rupee from a rapid decline when it faces pressure. A significant reduction in the foreign exchange reserves could limit the RBI's capacity to intervene in the market effectively, potentially leading to a weaker Indian currency. This underscores the importance of monitoring and managing the country's forex reserves to ensure economic stability.