India's Forex Reserves Fall to One-Year Low Amid RBI Intervention

India's Foreign Exchange Reserves Hit More Than One-Year Low

India's foreign exchange reserves fell to $681.4 billion in the week ended May 22, marking a more than one-year low, according to data released by the Reserve Bank of India (RBI) on Friday. This represents a decline of $7.5 billion from the previous week's total of $688.89 billion.

The decline in reserves was largely attributed to a decrease in the value of the RBI's gold holdings, which fell by $4.5 billion week-on-week. Additionally, the value of the RBI's foreign currency assets also decreased by nearly $3 billion to $543 billion. The RBI's foreign currency assets include the effect of appreciation or depreciation of other currencies in the reserves.

The RBI has been selling dollars to defend the beleaguered rupee, which has declined 4% since the U.S.-Iran war began. The surge in energy prices has sparked capital outflows and clouded India's macroeconomic outlook. In the week to which the data pertains, the rupee slid to a record low of 96.96 per dollar before being shored up by firm RBI intervention over multiple trading sessions.

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The rupee ended the session at 95 per dollar, up 0.7% week-on-week. Foreign exchange reserves include India's Reserve Tranche position in the International Monetary Fund.