India's forex reserves fall to two-year low at $524.52 billion

Representative Image

India's foreign exchange reserves fell for the week ending October 21 as the Reserve Bank of India (RBI) continues to protect the rupee from falling further.

The RBI's weekly statistical supplement showed on Friday that the forex reserves of the country fell by $3.85 billion to $524.52 billion in the week ended October 21.

The foreign exchange reserves have dropped to their lowest level since July 2020.

The fall in the foreign exchange reserves can be attributed to a decrease in the Foreign Currency Assets (FCA), which is a major component of the overall reserves. The FCA dropped by $3.59 billion to $465.08 billion for the week ending October 21. Gold reserves also fell by $247 million to $37.21 billion.

In the reporting week, the rupee has fallen to a record low and breached 83-mark per dollar for the first time. To protect the rupee the central bank has burnt a lot of reserves.

So far, the central bank has spent more than $100 billion of forex reserves to shield the rupee, which has fallen about 12 percent against the dollar this year. Some dealers said the intensity of the RBI intervention will decline. Some others said they expect the central bank to continue to support the local currency because India has sufficient foreign reserves.

On October 20, the rupee hit a new record low against the dollar due to weakening Chinese yuan, bouncing DXY (US Dollar Index), rising Brent crude prices and higher 10-year UST (US Treasury) yields.

Today, the rupee ended at 82.47 against the US dollar, which is nearly flat from its previous close.