Six weeks in a row, the country's foreign exchange reserves fell to their lowest level in almost two years.
Since the crisis in Ukraine, India's foreign exchange holdings have gone down by more than $80 billion. In the last week alone, the Reserve Bank of India sold more than $2 billion worth of dollars to help the rupee cross the 80-to-the-dollar mark.
The RBI's most recent weekly report shows that foreign exchange reserves hit their lowest level in more than two years during the week ending September 9. They dropped by $2.234 billion, from $553.105 billion the week before to $550.871 billion.
Since Russia invaded Ukraine at the end of February, India's import coverage has gone down for six weeks in a row and 23 out of 29 weeks. This is because the Reserve Bank of India (RBI) has been taking money out of reserves to stop a rise in the US dollar caused by capital leaving assets denominated in dollars.
Since late October, when they were at their highest, the country's foreign exchange reserves have dropped by more than $90 billion.
Even though there has been a steady flow of foreign capital into the country's markets, the growing current account deficit has not been able to stop the decrease in import coverage.
After the rupee fell sharply this year from over $74 to a weak record high of over 80 against the dollar, the RBI stepped in to keep the currency from going through wild swings.
The RBI's most recent monthly bulletin, which came out on Friday, showed that the central bank sold a net of $19.05 billion worth of foreign currency on the spot market in July. This helps to show that.
Based on what happened on the Rupee market in August and this month, this pattern has continued.
As the dollar continues to rise to record highs against most major currencies not seen in more than 20 years, the decline in the country's foreign exchange reserves is likely to be the main topic of conversation for a while.
The rupee had its worst week in five years on Friday, when the dollar hit a record high. This was because more people were betting that the Federal Reserve would raise interest rates, and the World Bank and the International Monetary Fund were warning about slow economic growth and rising inflation.
A currency broker who spoke to Reuters said that people on the market were cautious and thought that 80 rupees to the dollar was a safe level.
After a global sell-off caused by the broadest and most aggressive policy tightening in decades and the risk of a coming recession, Indian stocks fell in a market slaughter on Friday, wiping out the week's gains and extending their losses for the third straight day.
This means that the RBI will keep taking money out of its reserves to protect the rupee from big changes.
We think that the strong dollar and widespread fear of taking risks will hurt the rupee's trading performance. Anuj Choudhary, a research analyst at Sharekhan by BNP Paribas, told PTI that global markets fell after IMF spokesman Gerry Rice said he was worried about the global economy slowing down even more and that some countries could be in recession by 2023.
Even though the country's foreign exchange reserves have dropped a lot this year, it has still done better than its rivals in emerging economies, where import coverage has reached crisis levels.
According to the RBI's most recent report, India's foreign exchange assets (FCA), which make up most of the country's foreign exchange reserves, dropped by $2.519 billion to $489.598 billion in the week ending September, from $6.527 billion to $492.117 billion in the same week during the reporting period.
The value of the appreciation or depreciation of non-US currencies held in foreign exchange reserves, like the euro, the pound, and the yen, is included in the foreign currency assets that are denominated in dollars.
The value of gold reserves, on the other hand, went up by $340,000,000 to $38,644,000,000.
During the reporting week, SDRs went down by $63 million to $17.719 billion, but the country's IMF reserves went up by $8 million to $4.91 billion.
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