MUMBAI: With the rupee continuing to bleed, the Reserve Bank has been in the market to stem the tide on a regular basis, leading to a massive drop in the forex reserves to the tune of almost $10 billion in the week to January 2. The sharp decline was also due to the plunge in gold prices in the week and the resultant fall in the value of the gold reserves.
The rupee slipped for the fourth day Friday pressured by high dollar demand linked to maturing non-deliverable forward (NDF) positions and corporate hedging as global markets awaited a key US Supreme Court ruling on trade tariffs. The currency closed at 90.1625 against the dollar, down 0.1% on the day but little changed for the week.
The RBI said Friday that forex reserves fell sharply by $9.809 billion to $686.801 billion in the week to January 2.
Weakness in local stocks also weighed on the rupee, with the Sensex and the Nifty logging their steepest weekly falls since late September. The indices fell on all five days of the week losing more than 2.5%.
Traders pointed to heightened dollar demand at the central bank's daily reference rate and hedging activity from companies, which weighed on the local unit on Friday. They said state-run banks were seen offering dollars near the day's low for the rupee, which helped limit its losses.
Another reason for the rupee pain is the continuing selloff of domestic equities by foreign investors, who have already sold nearly $1 billion of local stocks in January, adding to the record near $19 billion outflow last year.
For the reporting week, the RBI said that foreign exchange reserves currency assets, a major component of the reserves, also decreased by $7.622 billion to $551.99 billion.
Expressed in dollar terms, the foreign currency assets include the effects of appreciation or depreciation of non-US units, such as the euro, pound, and the yen, held in the foreign exchange reserves.
Another reason for the significant drop is the drop in gold valuation, which dipped by $2.058 billion.
Following the steep correction in gold prices in the last week of the year, after rallying to a record high of $4,575/ounce in the week to December 15, 2025, the value of the gold reserves, which is around 880.8 tonnes as of September 2025, dropped by $2.058 billion to $111.262 billion during the week, the RBI said.
The special drawing rights were also down by $25 million to $18.778 billion, the apex bank said, adding that the country’s reserve position with the IMF dropped by $105 million to $4.771 billion.