Forex reserves fall $10 bn as decline in gold prices drags overall holdings

India's foreign exchange reserves recorded their steepest weekly decline since March, with a sharp fall in gold reserve valuations offsetting gains in foreign currency assets

Foreign-exchange reserves in India declined by $9.98 billion to $671.63 billion in the week ended June 12, marking the steepest weekly drop since the end of March, according to the latest data released by the Reserve Bank of India (RBI).

The reserves fell $56 billion since the beginning of the conflict in West Asia in late February. 

The decline during the reporting week was primarily driven by a sharp fall in value of gold reserves. 

The RBI data showed that the value of gold holdings fell by $10.75 billion during the reported week. 

Market participants said the fall in reserves was largely on account of revaluation losses due to a decline in gold prices even as the central bank made modest dollar purchases during the period. 

 

Gold prices fell 2.87 per cent to $4,204 per ounce during the reported week. 

Foreign-currency assets (FCAs), the largest component of the country’s foreign-exchange reserves, increased by $846 million during the same period to $544.3 billion. 

“Forex reserves declined mainly due to revaluation losses as gold prices fell during the week,” said a market participant. “The RBI did buy dollars, but the amount was small,” the person added. 

Special drawing rights fell by $66 million to $18.7 billion during the week.

 

India’s reserves position with the International Monetary Fund decreased by $11 million to $4.82 billion.

 

Foreign-exchange reserves had hit a record high of $728.49 billion in the week ended February 27. Since then they have declined by around $56 billion on the back of the RBI’s intervention in the spot and forward rupee markets to smooth currency volatility amid global uncertainties and geopolitical tensions.

 

The latest data showed that the RBI’s net short-forward books stood at $95.3 billion at the end of April, after touching a record $103.1 billion in March.

 

The rupee depreciated 0.18 per cent against the dollar during the reporting week even as the dollar index eased by 0.3 per cent over the same period.

 

The domestic currency, however, recovered this week amid sustained foreign inflows and a fall in the prices of crude oil.

 

The rupee appreciated 0.82 per cent during the week and erased its losses this financial year. It was trading 0.51 per cent stronger against the dollar as against its level at the beginning of 2026-27.

 

So far in June, the rupee gained 0.71 per cent against the greenback. It settled at 94.33 on Friday, almost steady against the previous close of 94.34.

 

The local currency appreciated by 0.82 per cent during the week ended Friday.  

 

Dealers said the central bank had recently resumed dollar purchases as inflows into domestic markets improved.

 

The RBI is estimated to have bought more than $5 billion over the last three trading sessions, helping rebuild reserves while gradually reducing reliance on its large short dollar forward position.

 

“The fall in prices of crude oil along with FPI (foreign portfolio investment) inflows might help the rupee appreciate up to 94. Resistance is seen near 94.10,” said a dealer at a state-owned bank. “The RBI has been buying dollars and absorbing part of the inflows. Hence, the rupee is not expected to appreciate sharply,” he added.