Forex Reserves Fall To $702.57 Billion, Snapping Three-Week Rising Streak

India's foreign exchange reserves fell to $702.57 billion for the week ended Sept. 19, according to data from the Reserve Bank of India on Friday.

The country's forex kitty dipped by $0.4 billion over the previous reporting week. In the previous reporting week, the reserves had risen to $702.97 billion.

The Indian rupee hit a new record low against the US dollar, falling by 41 paise to trade at 88.73 on Tuesday. This reflects continued pressure on the currency amid global and domestic economic factors. Global risk-aversion and trade policy uncertainty has also exacerbated the rupee's depreciation, analysts said.

For the week ended Sept. 19, foreign currency assets — a major component of the reserves — fell a billion dollars to $586 billion, according to the RBI data. In dollar terms, foreign currency assets include the effect of the appreciation or depreciation of non-US units like the euro, pound and yen held in foreign exchange reserves.

Gold reserves increased by $0.3 billion to $92.7 billion during the week.

India ranks as the fourth-largest holder of foreign exchange reserves, sufficient to cover nearly a year of imports. The country's forex holdings are the fourth largest, after China, Japan and Switzerland.

Market sentiment around the RBI's upcoming MPC meeting is generally divided between a potential rate cut and a prolonged pause. While some analysts expect a dovish tilt due to global growth concerns and moderating domestic inflation, others point to the need for continued vigilance against price pressures and the stability provided by a pause.

The MPC may adopt a dovish tilt at its meeting next week and deliver an interest rate cut to support the economy, according to Citi's Chief India Economist Samiran Chakraborty. The MPC will meet from Sept. 29 to Oct. 1

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