India's forex reserves hit 10-month low, rupee faces persistent headwinds

Investing.com -- India's foreign exchange reserves have been on a declining trend for six consecutive weeks, standing at a 10-month low of $625.87 billion as of Jan. 10, according to data from the Reserve Bank of India (NS:BOI ) (RBI). This marks a decrease of $8.72 billion in just one week, the most significant drop seen in two months.

The reserves have seen a cumulative fall of $23.5 billion over the previous five weeks. In comparison to their all-time high of $704.89 billion reached in late September, the reserves are down by $79 billion. The changes in foreign currency assets can be attributed to the RBI's interventions in the forex market and the fluctuating value of foreign assets held in the reserves.

The RBI has been actively intervening in the forex market to prevent excessive volatility of the rupee. Despite these efforts, the Indian currency has been facing ongoing challenges due to the strengthening U.S. dollar and weak capital flows in recent weeks. Nevertheless, the central bank's regular interventions through state-run banks have helped limit the rupee's losses.

In the week of Jan. 10, the rupee reached a record low of 85.97, marking its tenth consecutive weekly loss. Amid these strong global headwinds, the RBI is expected to be more careful in using its foreign exchange reserves to manage the volatility in the domestic currency market.

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Source: Investing.com