India's Foreign Exchange Reserves Decline

India's foreign exchange reserves experienced a decline of $4.112 billion in the week ending December 27, totaling $640.279 billion. This decline is attributed to the Reserve Bank of India's interventions aimed at stabilizing the rupee, which has been retreating against the US dollar.

Key Factors and Statistics

• The current decline marks the fourth consecutive weekly fall in foreign exchange reserves.
• Since October, the reserves have decreased by over $60 billion.
• Heavy outflows of foreign institutional investment over the past two months have contributed to this decline.

Causes of Decline

• The Reserve Bank of India has been selling dollars from its reserves to slow the rupee's depreciation.
• The rupee has faced pressure as overseas investors seek safer havens and take dollars out of the country.
• The rupee closed at a new low of 85.78 against the dollar, marking a 1.3% depreciation over the month.

Impact of Global Currency Fluctuations

• The depreciation of reserves held in other global currencies such as the euro, pound, and yen has also affected the overall reserves as the US dollar has strengthened globally.

Historical Context

• The all-time high for India's forex reserves was $704.885 billion on September 27.
• Since achieving that peak, reserves have generally been depleting week after week, with some exceptions.