India's forex reserves down $1.4 bn as RBI fights rupee fall

India's foreign exchange reserves, which showed a rising trend for two consecutive weeks fell by $1.4 billion to $351.106 billion during the week ended 18 December 2015, on account of a fall in foreign currency reserves, data released by the Reserve Bank of India (RBI) showed.

According to the Reserve Bank of India's (RBI) weekly statistical supplement, the Forex reserves stood at $351.10 billion for the week under review.

Market observers attribute the sudden depletion in foreign currency reserves to RBI's selling of the greenback in an attempt to arrest the continuing depreciation of the rupee.

The rupee value had been dented on account of a decision by the US Fed's Federal Open Market Committee to raise key interest rates.

For the previous week ended 11 December, the country's foreign reserves had risen by $407.9 million to $352.50 billion.

The rupee value was dented during the period proceeding to the FOMC meet, as foreign funds went on a selling spree in the domestic equity and debt markets, causing a spurt in the demand for dollar.

RBI's attempts, however, had a minimal impact on the rupee fall, with the rupee strengthening by 49 paise to 66.40 a dollar as of 18 December against its previous close of 66.89 (66.8850) to a greenback on 11 December 2015.

Stock exchange data showed that foreign portfolio investors have bought stocks worth Rs19.4 crore in the week ended 18 December 2015 while they had taken out Rs23,352 crore during the period August-September. In November alone, the foreign investors sold stocks worth around Rs9,000 crore.

The foreign currency assets (FCAs) which constitute the largest component of the country's forex reserves dwindled by $1.36 billion to $328.26 billion in the week under review.

Besides the dollar, India's foreign currency assets consist of nearly 20-25 per cent of other major global currencies, securities and bonds.

Gold reserves of the country remained stagnant at $17.54 billion.

Gold reserves had, on 4 December, plunged by $1.14 billion to $17.54 billion, as international prices crashed to a six-year low.

Special drawing rights (SDRs) were lower by $24.3 million at $3.99 billion while the country's reserve position with the International Monetary Fund (IMF) fell by $7.8 million to $1.29 billion.