India's FX reserves loss in August fourth highest among EMs

According to Bloomberg data the fall in reserves were $ 1.54 billion

The fall of $1.54 billion in India’s foreign exchange reserves in August was the fourth-highest among emerging markets, after China’s $93.91 billion, Indonesia’s $2.21 billion and Malaysia’s $2 billion.

During August, the Reserve Bank of India (RBI) intervened heavily in the foreign exchange market to stem volatility in the rupee. After China devalued the yuan, various emerging market currencies weakened against the dollar.

In August, the rupee depreciated 3.65 per cent against the dollar. “RBI’s interventions have really helped the rupee; else, it would have weakened further. Even after this fall in foreign exchange reserves, it is adequate to face the US

Fed’s actions,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.

At its two-day meeting later this week, the US Federal Reserve’s Federal Open Market Committee might announce a rate rise, which the currency market has been factoring in.

“The depletion in India’s foreign exchange reserves was due to intervention by RBI and the depreciation of other currencies against the dollar, which are part of our foreign exchange reserves. I do no think the US Fed’s rate rise is an immediate issue. But if the dollar continues to appreciate again emerging market currencies, China might be forced to devalue the yuan further. That will have an impact on the rupee, too,” said Anindya Banerjee, currency analyst at Kotak Securities.

Monday the rupee ended strong at 66.33 compared with previous close of 66.54 per dollar. However, Banerjee believes that there is more weakness in store for the rupee. "The rupee may depreciate by another 3 per cent by end- December," he said. Since the start of this month the rupee has strengthened by 0.22 per cent against the dollar.

Among emerging markets the lowest depreciated in foreign exchange reserves was witnessed by Philippines. For few countries like South Africa, Singapore and Taiwan, the foreign exchange reserves have in fact risen in August.