Foreign exchange reserves decreased for the 9th consecutive week, what would be the effect of decreasing reserves

For the week ended September 30, reserves fell by $ 4.854 billion to $ 532.664 billion. The country’s foreign exchange reserves reached an all-time high of $645 billion in October 2021.

Forex reserves decreased for the 9th consecutive week

The trend of decline in the country’s foreign exchange reserves has continued for the 9th consecutive day. With the decline, now the country’s reserves have reached a low of 2 years. The Reserve Bank has already said that the country’s reserve Most of the decline in the rate is due to the exchange rate. Rupee is currently at record low levels against the dollar. Concerns have increased due to the continuous decline in the reserve. However, the Reserve Bank has said that despite the decline, India’s position in terms of foreign exchange is very strong. Know if the reserve falls more than a limit, then what is its effect on the economy.

Where did foreign exchange reserves reach

The country’s foreign exchange reserves declined by $ 4.854 billion to $ 532.664 billion in the week ended September 30, as the country’s foreign exchange reserves continued to decline. The reserves were lower by $ 8.134 billion in the previous week at $ 537.518 billion. It is believed that this reduction in foreign exchange reserves has come amid ongoing efforts to stop the fall in the rupee rate against the dollar. The country’s foreign exchange reserves had reached an all-time high of $645 billion in October 2021.

According to the weekly data released by the RBI on Friday, there has been a decrease in foreign exchange reserves in the week ended 30 September due to the fall in foreign currency assets (FCA). The FCA is actually a major part of the entire stock. The central bank said that during the week under review, FCAs declined by $4.406 billion to $472.807 billion. In dollar terms, FCAs include the effect of appreciation or depreciation in non-US currencies such as the euro, pound and yen held in foreign exchange reserves.

According to the data, the value of gold reserves has come down by $ 281 million to $ 37605 billion. In the week under review, special drawing rights (SDRs) with the International Monetary Fund (IMF) rose by $167 million to $17.427 billion. RBI data shows that the reserve country’s currency reserves with the IMF remained unchanged at $4.826 billion in the reporting week.

What is the effect of weak reserve

Declining foreign exchange reserves are a matter of great concern for emerging economies. In fact, with the help of foreign exchange, central banks can control the sharp fall in domestic currency. When there is a period of volatility, in the event of a sharp decline, banks can use their reserves to handle the currency. With this, the currency can be kept in a controlled range amid uncertainty. And the import bill remains under the control of the country. However, this capacity is exhausted by decreasing reserves and a sharp fall in the currency increases the pressure in the economy.

At the same time, strong reserves increase confidence among foreign traders and investors about the economy. Because this indicates that the economy can easily tolerate any minor shock. A strong reserve proves to be very helpful in increasing foreign investment and winning the trust of credit rating agencies. All such countries whose reserves have reached near exhaustion, not only have investors distanced themselves from them, but due to the lowering of the credit rating, there is also a problem in raising new loans.

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