Foreign exchange reserves fell due to weakness in rupee, exchange rate fell by up to 67 percent: RBI

Reserves stood at US$ 606.47 billion on April 2, while it declined to US$ 537.5 billion on September 23. This was the eighth consecutive week that forex reserves fell.

Forex reserves fell due to fall in exchange rates

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The main reason for the decrease in foreign exchange reserves since April in the current financial year is the change in the exchange rate. Reserve Bank of India (RBI) Governor Shaktikanta Das said in the policy review that 67 percent of the total fall in the reserve has been seen due to the change in the exchange rate. He said that the change in the exchange rate was seen due to the strengthening of the US currency and rising US bond yields. Significantly, in the current financial year, there has been a sharp fall in the value of rupee against the US dollar. At the same time, there has been a sharp decline in foreign exchange reserves. The reserves stood at US$ 606.475 billion on April 2, while it declined to US$ 537.5 billion on September 23. This was the eighth consecutive week that forex reserves fell.

Dollar index up more than 14 percent

In the current financial year till September 28, the US dollar has gained 14.5 per cent against six major currencies. In such a situation, there is a lot of turmoil in the currency market around the world. Releasing the bi-monthly monetary policy review, Das said that the movement of the Indian rupee has been steady compared to most other countries. He said the rupee depreciated 7.4 per cent against the US dollar during the period under review, which is much better than other currencies. Das also said that a stable exchange rate is a sign of financial and macroeconomic stability and market confidence. He said that the rupee is a freely released currency and its exchange rate is determined by the market. “RBI has not fixed any fixed exchange rate (for the rupee). He intervenes in the market to prevent excessive volatility.” Das said the adequacy aspect of forex reserves has always been kept in mind and it remains strong. According to him, as of September 23, 2022, India’s foreign exchange reserves stood at $ 537.5 billion.

Policy is not decided by exchange rate

However, the governor has said that monetary policy decisions are not affected by currency fluctuations. Das said in a press conference after the bi-monthly monetary review on Friday that the management of the currency is under the purview of the Reserve Bank and the central bank will take all appropriate measures for this. He said the central bank decides the rate strategy on the basis of domestic factors linked to inflation and growth. He said that the highest priority is given to inflation. We also look at the growth aspect. Das also said that there is nothing to worry about cash in banks. Funds of more than five lakh crore rupees are widely available in the system.