NEW DELHI: Amid the concerns raised over the shrinking forex reserves, the RBI Governor has said two-third of the fall in India’s forex reserve during the current financial year is due to valuation changes arising from an appreciating US dollar and higher US bond yields.
Shaktikanta Das said in a statement while unveiling the RBI’s bimonthly monetary policy that India’s foreign exchange reserve stood at USD 537.5 billion as of September 23, 2022, down from USD 545 billion a week ago. However, Das said forex reserve was favourably placed compared with most peer economies.
Das added that the forex reserve is adequate. At USD 537.5 billion, India’s forex reserve covers for just over 8 months of imports. Forex reserves comprise 90% of foreign currency assets and the rest is gold and special drawing rights (SDRs) with the IMF. As per experts, the drop in reserves recently was largely due to plunge in valuation of major reserve currencies -- Euro, Pound sterling and Swiss Franc etc -- against the US dollar.
On the issue of RBI’s intervention on the exchange market to support the local currency, Das said rupee is a freely floating currency and its exchange rate is market determined. He said the RBI doesn’t have any fixed exchange rate in mind.
“It (RBI) intervenes in the market to curb excessive volatility and anchor expectations,” he said. As per Das, during the current financial year (up to September 28), the US dollar has appreciated by 14.5% against a basket of major currencies but rupee has depreciated by 7.4% against the dollar.