MUMBAI: Indicating serious intervention in the forex market to defend the rupee that has plumbed to record lows in the week, the forex reserves have come off the record highs, falling by $3.4 billion to $667.39 billion for the week ending July 26.
The monetary authority intervenes in the forex market to manage liquidity and prevent excessive volatility in the rupee. During the week, the rupee had plunged to its lifetime low and traded in the 83.70 range. Its worst close was today (Friday plumbing to 83.746).
In the previous reporting week, the foreign exchange reserves had hit an all-time high of $670.86 billion.
According to the weekly statistical supplement issued by the Reserve Bank on Friday, after jumping to a record high in the week to July 19, the forex reserves dipped by $3.47 billion to $667.39 billion for the week to July 26.
Foreign currency assets, which are the largest component of the forex kitty and include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves, fell by $1.1 billion to $586.88 billion.
On the other hand, gold reserves contracted by $2.2 billion to $57.69 billion, and SDRs fell by $5 million to $18.202 billion, while the reserve position in the IMF was up by $2 million to $4.61 billion.
Typically, the RBI, from time to time, intervenes in the market through liquidity management, including the selling of dollars, with a view to preventing a steep depreciation in the rupee.
The RBI closely monitors the forex markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.