India's Forex Reserves Drop To Lowest Since July 2020

India's foreign exchange reserves dropped to the lowest since July 2020 amid continuing efforts by the central bank to stabilise the Indian currency.

Foreign exchange reserves declined by $4.9 billion to $532.7 billion for the week ended Sept. 30, 2022, according to the Reserve Bank of India's weekly statistical supplement, issued on Friday.

India’s foreign exchange reserves compare favourably with most peer economies, RBI Governor Shaktikanta Das had said, in his monetary policy statement on Sept. 30.

About 67% of the decline in reserves during the current financial year is due to valuation changes arising from an appreciating U.S. dollar and higher U.S. bond yields, he said.

Sensitivity of changes in India’s forex reserves to dollar movement is currently at an all-time high, with a 1% change in the dollar index resulting in $4 billion change in foreign currency assets, according to estimates by QuantEco Research.

This reflects the recent extreme volatility in case of non-dollar reserve currencies like the euro, the British pound sterling and the Japanese yen, among other currencies, it said.