A strengthening US dollar, along with the central bank's attempts to stop the volatility in the rupee's value, depleted India's foreign exchange reserves by $750.2 million. Overall, the Forex reserves stood at $351.61 billion for the week ended November 27. India's Forex kitty had fallen by $149.7 million to $352.36 billion during the previous week ended November 20.
“The dollar's appreciation in the week under review against major global currencies like pound sterling, euro and yen led to the Forex reserves depletion," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities said. The Indian foreign reserves consists' of nearly 20-25 per cent of major non-dollar global currencies. The individual movements of these currencies against the US dollar impacts the overall reserves value. “The dollar appreciation has taken place on the back of heightened chances of a US rate hike. The US dollar had appreciated by close to one per cent during the week under review,” Banerjee added.
The US dollar is strengthening against emerging markets (EMs) currencies, gold and other assets classes ahead of the US rate hike. The FCA constitutes the largest component of India's Forex reserves. It consists of US dollars, major non-dollar currencies, securities and bonds. “The FCA expressed in US dollar terms, include the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve,” the RBI was quoted in its statistical supplement. “RBI's selling activities could have attributed to the fall in the FCA. The RBI has been active in its attempts to stem the fall in rupee value and to maintain the Indian currency in it's comfort zone,” an analyst said.
The National Securities Depository Limited (NSDL) figures showed that the FPIs (Foreign Portfolio Investors) sold $232.44 million in equity and debt markets from November 23 to 27. The data with stock exchanges showed that the FPIs sold stocks worth £149.28 million in the period under review. Notwithstanding the general slide in the reserve value, the country's gold reserves remained stagnant at $18.69 billion. The reserves had risen by $540 million during the week ended November 6.
