India’s foreign exchange reserves down $90bn from peak of $642bn in November 2021 – The New Indian Express

Express press service

NEW DELHI: India’s foreign exchange (forex) reserve fell another $7.9 billion in the week ending September 2, 2022, to $553 billion. The country’s foreign exchange reserve has shrunk by nearly $90 billion from a peak of $642 billion in November 2021.

Foreign exchange reserves at the current level can pay for 9 months of imports. India’s monthly import bill is around $63 billion.

The continued decline in the country’s foreign exchange reserve has been widely attributed to efforts by the central bank to support the rupee, which has fallen 8% over the past year.

“Since the end of June, FX assets have declined by approximately $32 billion. We estimate that approximately $8-10 billion could be due to the valuation impact and the rest due to market sales. cash,” said Anindya Banerjee, Vice President, Currency and Interest Rate Derivatives at Kotak Securities.

Foreign exchange reserves comprise 90% of foreign currency holdings and the rest is made up of gold and special drawing rights (SDRs) with the IMF.

According to Banerjee, the fall in reserves in August was largely due to the fall in the value of the main reserve currencies – the euro, the pound sterling and the Swiss franc, etc. – against the US dollar.

According to economist Lekha Chakraborty, the speculative silver component of forex is volatile due to interest rate differentials. “With the Federal Reserve carrying out a series of interest rate hikes, emerging economies including India are experiencing capital flight and this is affecting our foreign exchange reserves,” she added.

She thinks that the RBI’s defense of interest rates is an important measure to prevent capital flight, and the RBI is doing its job.

However, economists are not yet pressing the panic button. “We have sufficient reserves to deal with the current situation and I do not consider the impact to be significant enough,” said Kunal Kumar Kundu, Indian economist at Societe Generale Corporate and Investment Bank.

NEW DELHI: India’s foreign exchange (forex) reserve fell another $7.9 billion in the week ending September 2, 2022, to $553 billion. The country’s foreign exchange reserve has shrunk by nearly $90 billion from a peak of $642 billion in November 2021. Foreign exchange reserves at the current level can pay for 9 months of imports. India’s monthly import bill is around $63 billion. The continued decline in the country’s foreign exchange reserve has been widely attributed to efforts by the central bank to support the rupee, which has fallen 8% over the past year. “Since the end of June, FX assets have declined by approximately $32 billion. We estimate that approximately $8-10 billion could be due to the valuation impact and the rest due to market sales. cash,” says Anindya Banerjee, Vice President, Currency and Interest Rate Derivatives at Kotak Securities. (SDRs) from the IMF According to Banerjee, the fall in reserves in August was largely due to the fall in the value of the main reserve currencies – the euro, the pound sterling and the Swiss franc, etc. – by against the U.S. dollar. According to economist Lekha Chakraborty, the speculative money component of forex is volatile due to interest rate differentials. “With the Federal Reserve making a series of interest rate hikes, economies emerging countries, including India, are experiencing a no capital flight and this affects our foreign exchange reserves,” she added. She thinks that the RBI’s defense of interest rates is an important measure to prevent capital flight, and the RBI is doing its job. However, economists are not yet pressing the panic button. “We have sufficient reserves to deal with the current situation and I do not consider the impact to be significant enough,” said Kunal Kumar Kundu, Indian economist at Societe Generale Corporate and Investment Bank.

Carol N. Valencia