Forex reserves fall by $2.89 bn

Foreign currency assets fall by $2.65 bn to $325.66 bn

The Reserve Bank of India (RBI)’s foreign exchange reserves fell by $2.89 billion for the week ending September 4 to $349.03 billion, shows data released on Friday. The foreign exchange reserves are now near a level last seen in the week ending April 24, at $344.6 billion.

Foreign currency assets,  fell by $2.65 billion to $325.66 billion. According to currency dealers, the fall was due to interventions made by the central bank and change in valuation of the reserves.

Gold reserves stood at $18.04 billion after a fall of $214.8 million.

In August, after China had announced devaluation of the yuan, the rupee began weakening sharply and the impact  was there even in September. During this time, RBI had intervened several times to reduce volatility in the rupee against the dollar.

Special Drawing Rights fell by $18.6 million to $4.05 billion, while India’s reserve position with the International Monetary Fund (IMF) stood at $1.29 billion, a fall of $5.9 million.

On Friday, the rupee ended weaker at 66.54 a dollar compared with its previous close of 66.43. The weakness was due to dollar buying by importers, mainly of oil importers, said  dealers.

RBI had changed its dollar buying strategy to build foreign exchange reserves and the July data, released on Thursday, showed the central bank purchased more dollars through the forward market compared with the spot market.

RBI data for July show the outstanding net forward purchases stood at $4.60 billion compared with $2.59 billion in the previous month. The net purchases of foreign currency from the spot market was $169 million compared with $565 million the previous month.

Earlier, the strategy followed by the central bank was to buy more dollars from the spot market than forwards.

For example, in May, the net purchases of foreign currency from the spot market was $2.58 billion compared with outstanding net forward purchases worth $1.86 billion.