MUMBAI: India’s foreign exchange reserves fell $1.8 billion to $638.7 billion as of February 28, coming off two-month highs in the previous week, data released by the central bank on Friday showed.
They had risen by $4.76 billion in the prior week.
Changes in foreign currency assets are caused by the central bank’s intervention in the forex market as well as the appreciation or depreciation of foreign assets held in the reserves.
India’s sluggish economic growth, uncertainty over U.S. President Donald Trump’s tariffs and rising possibility of a global trade war have hit foreign investors’ demand for Indian financial assets and hit the rupee.
The RBI has repeatedly curtailed volatility in the forex market through dollar sales in the spot market and has also conducted dollar-rupee buy-sell swaps to help boost rupee liquidity in the banking system.
The decline in the reserves was largely due to the RBI selling dollars worth $4.7 billion on a net basis, said Gaura Sen Gupta, India economist at IDFC FIRST Bank.
[India’s foreign exchange reserves rise to two-month high][1]
However, a revaluation gain of around $2.9 billion helped trim the impact of the dollar sales by the RBI, she said.
In the week to which the reserves data pertains, the rupee depreciated 0.9% week-on-week. It fell 1% in February and slipped to a record low of 87.95 during the month.
The currency ended at 86.8725 on Friday, up 0.7% for the week, its best weekly performance since February 2023.
Foreign exchange reserves include India’s Reserve tranche position at the International Monetary Fund.
Foreign exchange reserves (in million US dollars)-------------------------------------------------- Feb 28 Feb 21 2025 2025--------------------------------------------------Foreign currency assets 543,350 543,843Gold 73,272 74,576SDRs 17,998 17,971Reserve Tranche Position 4,078 4,090--------------------------------------------------Total 638,698 640,479-------------------------------------------------- [1]: https://www.brecorder.com/news/40350621/indias-foreign-exchange-reserves-rise-to-two-month-high