Mumbai: India’s foreign exchange reserves plunged by $2.40 billion to $285.85 billion for the week ended June 1, apparently due to the central bank selling dollars to defend the rupee, Reserve Bank of India data showed Friday.
This is the fifth weekly drop in the forex reserves kitty. The reserves had declined by $1.74 billion and $1.80 billion respectively in the previous two weeks.
The Reserve Bank of India is believed to have sold dollars during these weeks to curb the slide in the rupee’s value.
The partially convertible rupee slumped to a record low of 56.52 against a US dollar on May 31. It has weakened sharply in the last two months due to increased demands from oil importers and outflow of money by the foreign institutional investors as poor GDP growth data dampened sentiments in the Indian markets.
Foreign currency assets, the biggest component of the forex reserves kitty, dropped by $1.31 billion to $253.09 billion during the week ended June 1, according to the Reserve Bank of India’s weekly statistical supplement.
The RBI did not provide any reasons for the change in foreign currency assets.
It said the assets expressed in US dollar terms included the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve.
However, market experts said the RBI had sold dollars from the reserves to curb the slide in the value of rupee.
The value of gold reserves declined by $1.03 billion to $25.58 billion during the week under review.
All components of the foreign exchange reserve registered a drop during the week. The value of special drawing rights (SDRs) dropped by $34.2 million to $4.34 billion and India’s reserves with the International Monetary Fund (IMF) fell by $22.3 million to $2.83 billion.