India’s foreign exchange reserves fell to $716.81 billion in the week through March 6 from $728.49 billionin the previous week, Reserve Bank of India data showed on Friday.
The $11.68 billion decline in reserves last week came amid heavy dollar sales by the central bank to support the rupee against pressure stemming from the Iran war and the surge in oil prices. The rise in US yields and the dollar strength further contributed to the drop in reserves, analysts said.
Gaura Sen Gupta, economist at IDFC FIRST Bank, estimates the decline in reserves reflected net dollar sales of about $6.1 billion by the RBI and valuation losses of roughly $5.4 billion.
“The RBI sterilized the liquidity impact of the dollar sales through on-screen bond purchases,” she added.
Much of the decline in the week for which the RBI shared data came from foreign currency assets, which fell $9.8 billion, while the value of gold reserves dropped $1.6 billion.
Changes in foreign currency assets, expressed in dollar terms, include the effect of appreciation or depreciation of other currencies held in its reserves.
Foreign exchange reserves include India’s Reserve Tranche position in the International Monetary Fund.