India’s foreign exchange fell by $9.3 billion in the week ending August 1, the steepest since mid-November, RBI data published Friday showed.
Total foreign exchange reserves stood at $688.9 billion as on August 1, down from all-time high of $704.89 billion reported in end-September 2024. At the current level, reserves are sufficient to cover more than 11 months of merchandise imports.
The data for weekly fall in FX reserves coincides with the US President Donald Trump’s July 30 announcement of imposing 25% tariff on Indian exports to the US. This led to a fall in the rupee, which closed at a record low against the dollar the next day. This week Trump slapped an additional 25% tariffs, effectively raising total US duties to 50%, because of India’s continued imports of Russian oil. Outflows from local equity markets have also kept the rupee under pressure.
According to Gaura Sengupta, chief economist, at IDFC First Bank, out of the total weekly fall, around $6.9 billion was account of the RBI’s intervention, where it net sold dollars and $2.1 is due to revaluation loss because dollar had strengthened in that period.
“The RBI’s intervention had seen through July and even in August given the pressure on the currency because of tariffs. The data for the next week (August 8) is also expected to show a fall because of the intervention as well as maturity of $5 billion dollar-rupee swaps,” she said.The RBI stated stance has been that it intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate.Foreign currency assets, which form over 84% of the total reserves, fell by over $7 billion. These assets are maintained as a multi-currency portfolio comprising major currencies, such as, US dollar, Euro, Pound sterling, Japanese yen, etc but expressed in dollar terms.
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