Reserves drop as FCNR inflows dry, RBI dollar sales continue
Reserves have fallen to $734.6 billion in the week ended October 2, the fourth consecutive week of fall and down from a recent peak of $785.71 billion reported on September 4, according to a footnote to governor Sanjay Malhotra’s monetary policy statement on Wednesday. The latest reserve numbers were released earlier than the scheduled date of October 9.
Besides the RBI’s dollar sales in the spot market, the sell/buy foreign exchange swaps through which the central bank sells dollars (and buys rupees) in the spot market with a contract to buy them back at a future date are also being used to support the rupee.
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However, despite the RBI action the Indian currency has continued to weaken, pressured by rising oil prices and increasing overseas interest rates as foreign portfolio investors are increasingly looking at the exit door.
The decline accelerated on Wednesday, with the currency falling nearly 0.5% to 96.8450 per dollar, within sight of its all-time low of 96.96.
