Trying To Defend The Rupee By Selling Dollars Is A Losing Proposition
The Reserve Bank of India’s foreign exchange reserves declined by $2.676 billion to stand at $593.279 billion in the week ended 13 May. The weekly data shows that the fall was mainly on account of a drop in foreign currency assets (FCA), a major component of the overall reserves, and a fall in its gold reserves.
FCAs declined by $1.302 billion to $529.554 billion in the week. Gold reserves decreased by $1.169 billion to $40.57 billion.
The RBI’s data also shows that in March, its forex reserves dropped by $20 billion on a net basis on rising dollar sales by it in the spot markets — the highest ever in a month.
The RBI’s reserves have been on a declining trend. In the previous week, they had declined by $1.774 billion to $595.954 billion. Just months ago, in September, they were at the all-time high of $642 billion. Reserves were down to 10 months of export cover as…
