Forex Reserves at $562.9 bn; Fall by $70 bn in 2022: India’s foreign exchange reserves fell by $70.1 billion in 2022, data released by the Reserve Bank of India (RBI) shows. In the week ending December 30, the foreign exchange reserves were $562.9 billion. The RBI’s intervention in the currency markets to combat volatility and the depreciation of other important currencies that the central bank holds are both contributing factors to the fall in foreign exchange reserves. The RBI net sold $33.42 billion till September, Union finance minister Nirmala Sitharaman said. The RBI holds major currencies including pound sterling, yen and euro in its reserves, which are expressed in US dollar terms.
January 2023 Current Affairs Quiz
Fall of The Rupee Through-out the Year:
- The rupee depreciated 10.2% against the US dollar in calendar year 2022.
- The rupee breached 80 against the dollar in September and has remained at Rs 81-82 levels since then.
- The rupee is likely to trade with an appreciating bias in the range of 81-83 against the dollar till March.
- In 2023, the Indian currency is expected to remain in the range of 80-83, the forex reserves and forward cover will aid in ensuring that the rupee will remain range bound.
A Reducing Import Cover:
By September 2021, forex reserves had reached a peak of $642.5 billion, before dropping to a low of $631.5 billion by the end of February 2022, when the conflict between Ukraine and Russia broke out. RBI had said that FX reserves of $564.1 billion as on December 9 are equivalent to 9.2 months worth of imports, lower than the projected 15 months of imports at the peak levels.
A Further Deteriorating Trend:
With the US Federal Reserve retaining a hawkish stance on interest rates, the rupee might breach 83 levels, according to analysts. On the trade front, the rupee will continue to be under pressure from imports of crude oil and other commodities.
Despite its slide, the rupee has been more resilient compared to its peers in other emerging markets due to RBI intervention. However, it has come at the cost of significant depletion in the foreign exchange reserves. According to reports, the foreign reserves slightly increased by $44 million over the week ending December 30. The increase was mainly due to increase in the gold reserves of $354 million, which was offset by decline of $302 million in the foreign currency assets. The RBI held 785.35 metric tonne of gold as of September 30.
