Forex reserves drop $2.8 bn to $287.8 bn

Fall in reserves was due to sharp fall in foreign currency assets which are the substantial part of reserves

Foreign exchange reserves dropped by $2.8 billion to reach $287.8 billion in the week ended June 21, the Reserve Bank of India said on Friday.

According to the weekly statistical supplement of the central bank, the fall in reserves was due a sharp fall in foreign currency assets, which form a substantial part of the reserves. Foreign currency assets came down by $2.6 billion during the week ended June 21.

The country's reserve position at the International Monetary Fund (IMF) decreased by $128 million to $2.2 billion, while special drawing rights from the IMF decreased by $28 million to $4.3 billion.

According to a currency dealer with a private bank, the fall in the reserves was partly due to the intervention in forex market by RBI and partly due the revaluation of currencies. The central bank, apart from dollars, also holds the UK pound, euro and Japanese yen in the reserves; values of these, too, are expressed in dollar terms.

RBI has been consistently intervening in the forex market to stop the rupee’s slide. In the week ended June 21, the rupee had weakened three per cent to close at 59.27 against the dollar.

Bank of America-Merrill Lynch, in a report on Friday, said according to its estimates, RBI can’t sell more than $30 billion to defend the rupee fall.