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India's forex reserves dip to eight-month low amid rupee weakness

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The RBI has been intervening in the forex market to manage volatility in the rupee. (Representational image: iStock)

INDIA's foreign exchange reserves have dropped for the fourth consecutive week, reaching an eight-month low of £516.26 billion as of December 27, according to data from the Reserve Bank of India (RBI) released on Friday.

The reserves fell by £3.31 bn during the reported week, following a cumulative decline of £11.05 bn over the preceding three weeks.


Changes in the foreign currency assets component of the reserves are influenced by the central bank's interventions in the forex market and fluctuations in the value of foreign assets held.

The RBI has been intervening in the forex market to manage volatility in the rupee. The domestic currency weakened to an all-time low of 85.8075 against the dollar last week, marking a 0.3 per cent decline over the period.

Concerns about slowing economic growth in India and a widening trade deficit have added pressure on the rupee.

These factors, combined with the dollar’s broad strength amid a hawkish US Federal Reserve stance and expectations around US president-elect Donald Trump's policies, have contributed to the decline.

The RBI is believed to have sold dollars through state-run banks to limit rupee weakness and prevent a sharp depreciation.

On Friday, the rupee settled at 85.77, reflecting a 0.2 per cent fall for the week and its ninth consecutive weekly loss.

India’s forex reserves also include the country’s reserve tranche position in the International Monetary Fund (IMF).

(With inputs from Reuters)

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