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India's Forex Reserves Fall $10 Billion as Gold Assets Shrink
20 Jun
Summary
- Forex reserves dropped by $9.98 billion to $671.63 billion in one week.
- A sharp decline in gold reserves, valued at $10.75 billion, drove the drop.
- Revaluation losses due to falling gold prices were the primary cause.
India's foreign exchange reserves experienced a sharp decline of $9.98 billion, reaching $671.63 billion by the week of June 12. This marks the most significant weekly decrease since late March. The primary driver behind this downturn was a substantial reduction in gold holdings, which fell by $10.75 billion during the reporting week.
Market analysts attribute this fall mainly to revaluation losses stemming from a 2.87% decrease in gold prices, which settled at $4,204 per ounce. Although foreign currency assets saw a modest increase of $846 million, reaching $544.3 billion, the overall reserves were negatively impacted by the gold slump. Special Drawing Rights and India's reserve position with the IMF also saw slight decreases.
These reserves had previously reached a record high of $728.49 billion in late February. Since the onset of global uncertainty and geopolitical tensions, reserves have decreased by approximately $56 billion, partly due to the Reserve Bank of India's interventions in currency markets. In recent trading sessions, the RBI has reportedly resumed dollar purchases to rebuild reserves.
