India's foreign exchange reserves fell by $1.269 billion to $719.748 billion in the week ended October 23, according to data released by the Reserve Bank of India (RBI) on Friday, PTI reported.
The fall extends the decline from the record high of $785.706 billion touched in the week ended September 4. In the previous reporting week ended October 16, reserves had dropped by $5.011 billion to $721.016 billion.
Gold fall drives the headline drop
Foreign currency assets, the largest component of the reserves, actually rose by $1.358 billion to $593.205 billion in the week ended October 23. The headline decline was driven by gold: the value of gold reserves decreased by $2.65 billion to $103.15 billion during the week, the RBI said.
Special Drawing Rights (SDRs) rose by $27 million to $18.605 billion, while India's reserve position with the International Monetary Fund (IMF) decreased by $4 million to $4.787 billion, the central bank said.
Expressed in dollar terms, foreign currency assets include the effects of appreciation or depreciation of non-US units such as the euro, the pound and the yen held in the reserves, so weekly moves reflect valuation changes as well as the RBI's own market operations.
Why reserves have been falling since September
Reserves touched their all-time high in early September after a heavy flow of currency under a special concessional swap for deposits from the diaspora, through which banks raised nearly $133 billion, BusinessLine reported. Experts cited by the paper attribute the decline since then to the deployment of those FCNR(B) resources and to currency defence by the RBI through dollar sales.
The weekly reserves release is closely watched as a gauge of India's external buffer. At $719.748 billion, the kitty remains among the largest in the world even after weeks of decline from the September peak.