India's foreign exchange holdings decreased by almost USD1 billion in the latest reported week, falling for the fourth consecutive week as a result of the rupee's plunge to all-time lows, during which time it first exceeded the 80-to-dollar mark.
However, that dedeclining trend may reverse if the latest week's rupee moves and foreign fund inflows are anything to go by.
India's foreign exchange reserves decreased by USD1.152 billion to USD571.56 billion in the week ending July 22, compared to USD572.712 billion in the week ending July 15, according to the latest Reserve Bank of India weekly supplement statistics.
Since Russia's invasion of Ukraine, India's import cover has fallen for four consecutive months, marking the 20th week of falls. During that time, foreign exchange reserves have dropped by around USD30 billion and more than USD70 billion from their top of USD642.45 in October.
The decline in the nation's foreign exchange reserves was brought on by a flight of foreign capital into dollar-denominated assets, which was a result of spiralling global inflation and larger-scale interest rate increases from the US Federal Reserve.
Since several months ago, foreign institutional and portfolio investors have been net sellers of Indian assets, driving the rupee to all-time lows. The rupee is down almost 7 percent since the beginning of the year, when it was trading at 74 to the dollar. In July, the currency reached above 80 to the dollar for the first time ever.
Due to a sharp decrease in the value of the dollar on Friday, the rupee experienced its biggest one-day advance in over a year. The session high for the Indian rupee against the dollar was 79.17, the highest value since July 7.
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