India's forex reserves dropped by $5.011 billion to $721.016 billion; on the other hand, gold reserves rose $706 million to $105.8 billion during the week ended October 16, according to data released by the Reserve Bank of India (RBI) on Friday. With this, the gold reserve declined over $64.69 billion from an all-time high of $785.706 billion---which was recorded last month.
In the previous reporting week, the foreign kitty declined by USD 8.578 billion to USD 726.027 billion.
Forex Was At All-Time High In Week Ended On September 4
Reserves touched an all-time high of $785.706 billion for the week ended September 4. The increase was due to a large inflow of dollars through special discount swaps for deposits of migrants. Banks had raised a record $133 billion through these swaps, but they have been declining since then.
Experts attribute the sharp decline in reserves to the use of FCNR(B) resources and currency hedges created by the RBI through dollar sales.
Forex Reserve Till Week Ended On October 16
Foreign currency assets, a major component of reserves, declined by $591.847 billion for the week ended October 16, data released by the Reserve Bank of India (RBI) showed.
What are foreign currency assets? In dollars, foreign currency assets include the impact of appreciation or depreciation in the value of non-US currencies. They are held in foreign currency reserves, such as the euro, pound and yen.
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Gold Reserve Appreciated
During the week under review, the value of gold reserves increased by $706 million to $105.8 billion. Special Drawing Rights (SDRs) increased as well, rising by $30 million to $18.578 billion.
Meanwhile, India's reserves with the IMF increased by $11 million to $4.791 billion, according to central bank data.
RBI Purchased Dollar
According to the central bank's monthly bulletin, the RBI's net purchases in the spot currency market stood at $43.264 billion in August.
The increase came as the central bank eased foreign currency concessional swaps (FCNR(B)) for non-residents (banks). This is the third consecutive month that the central bank has bought dollars from the spot market.
(With inputs from agencies)