Foreign exchange reserves dropped to the lowest since October 2020, amidst the central bank's continuing efforts to stabilise the Indian currency.
India's foreign exchange reserves declined by $5.2 billion to $545.7 billion for the week ended Sept. 16, 2022, according to the weekly statistical supplement on Friday.
While India's forex buffer should be sufficient to shield the economy against any major external shock, the ammunitions are trending lower, Kotak Economic Research said in a note. Considering the quantum of the Reserve Bank of India's intervention so far, the note said that the RBI is expected to become more prudent during the second half of the current fiscal while intervening in the forex market and allow the rupee to move in sync with global trends.
We expect the RBI's intervention to cap significant gains in order to rebuild the FX buffer and avert further overvaluation of the currency, the note said.
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