Reserve Bank of India data showed reserves stood at $593.323 billion as of June 24. Among them, foreign currency assets were US$529.216 billion, while gold reserves were valued at US$40.926 billion. The balance is deposited with the International Monetary Fund as Special Drawing Rights and Reserves.
The central bank has spent more than $41 billion defending the currency since February. In the three weeks prior to that, reserves fell by $10.785 billion.
Rahul Bajoria, MD and chief India economist at Barclays, said that given that imported inflation remains high and the rupee does not appear to be significantly overvalued on a real effective exchange rate basis, Monetary support from the RBI is likely to continue.
The rupee closed at 79.045 against the dollar on Friday and 78.97 on Thursday. Sriram Iyer, senior research analyst for Indian markets, said the exit of overseas investors from the Indian market, coupled with weak macro indicators, weighed on sentiment.
Economists expect India’s foreign exchange reserves, which serve as a safeguard for imports and a buffer against any external risks, could fall further to about $565 billion by the end of FY23.
“When sentiment turns, we think RBI reserves are likely to recover, which means a lot of intervention on the other hand and limited room for a quick appreciation of the rupee,” he said.