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Forex reserves drop $33.2 million to $400.84 billion
Why in the news ?
- According to RBI data, India’s foreign exchange reserves fell by $33.2 million to $400.847 billion in the week to 17 August mainly due to fall in foreign currency assets.
More in the news
- The reserves have been declining in the past few weeks as the Reserve Bank is selling the US dollar to contain depreciation in the rupee, which is frequently testing the 70-level against the American unit.
- The rupee opened on Friday at 70.24 a dollar and closed at 69.91.
- In the week ended 17 August, foreign currency assets, a major component of the overall reserves, dipped by $60.2 million to $376.205 billion, as per data.
- Expressed in the US dollar terms, foreign currency assets include the effect of appreciation/depreciation of the non-US currencies such as the euro, pound and the yen held in the reserves.
- Gold reserves rose by $36.1 million to $20.727 billion in the reporting week.
- The special drawing rights with International Monetary Fund (IMF) dipped by $3.4 million to $1.463 billion.
- The country’s reserve position with the IMF also declined by $5.7 million to $2.452 billion.
Foreign exchange reserves
- Foreign exchange reserves consist of any foreign currency held by a centralized monetary authority (RBI)
- Foreign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities on their own issued currency as well as to influence monetary policy.
- The forex reserve is also kept as a cushion against any potential balanced of payment related crisis.
- India’s foreign exchange reserves comprises of:
(i) Foreign currency assets (FCA)
(ii) Gold,
(iii) Special Drawing Rights (SDRs) and
(iv) Reserve tranche position (RTP) in the International Monetary Fund.
Source
The Hindu, LiveMint