Forex reserves dip $ 4.1 billion; most in 17 months

Forex reserves of the country fell most in last one and half years by $4.1 billion to $287.9 billion for the week ended 31 May, Reserve Bank of India said today. This was the lowest level of reserves in last eight months. Last time the reserves were at this level was in week ended 17 August 2012 at $288.9 billion.

According to weekly statistical supplement of the central bank, fall in reserves was due  sharp fall foreign currency assets as the rupee depreciated during the week. Rupee had fallen 1.5% during the week under review. Foreign currency assets came down by $3 billion during the week ended May 31.

Value of gold also dropped by $1.1 billion due to revaluation of the reserves. Country's reserve position at International Monetary Fund (IMF) increased by $5.3 million to $2.2 billion while special drawing rights from IMF went up by $10 million to $4.3 billion. Last time forex reserves fell such sharply was in December 2011 when they had fallen by $4.6 billion in the week ended 16 December 2011 and by $4.1 billion in the week ended 30 December 2011.

Analysts said, the reserves came down because of foreign institutional investors (FIIs) pulling out of market, import bill payments and weak dollar index. An analyst also said that government could be meeting its debt obligations overseas from reserves.

According to a currency dealer with a state run bank the reserves may fall further in the weeks to come as RBI may intervene in the forex market to arrest the volatility of the rupee against the dollar.