India forex reserves fall $18.34 billion amid rupee pressure

India’s foreign exchange reserves experienced a record weekly decline of $18.34 billion for the week ending September 25, falling to $747.56 billion. This drop was driven largely by a $15.16 billion decrease in foreign currency assets as the Reserve Bank of India (RBI) intervened aggressively to defend the rupee against pressures from rising crude oil prices and elevated US Treasury yields.

While the reserves saw a massive boost of $133 billion from Foreign Currency Non-Resident (FCNR) deposits by non-resident Indians, Nuvama Research suggests this provides only a temporary cushion. The research firm noted that while FCNR inflows have stabilized the rupee and the balance of payments, long-term external stability will require a meaningful return of foreign institutional investor (FII) flows to address the widening trade deficit.

In addition to the decline in foreign currency assets, the value of the RBI’s gold reserves fell by $2.6 billion to $108.70 billion during the same period. The rupee remains under strain due to global factors, including crude oil averaging $104 a barrel and US Treasury yields exceeding 5.25%.