India's forex reserves snap three-week gaining streak, drop by $2.54 billion to $635.721 billion

India's foreign exchange (forex) reserves snapped their three-week gaining streak to hit $635.72 billion as of February 14, coming off over one-month highs. According to the Reserve Bank of India (RBI), the forex reserves fell by $2.54 billion in the reported week, the most in a month. The forex reserves rose by $14.3 billion in the prior three weeks. According to RBI, in the previous reporting week, the reserves had increased by $7.654 billion to $638.261 billion.

The forex reserves had hit an all-time high of $704.885 billion in September 2024. The forex kitty declined thereafter due to forex market interventions by RBI to reduce volatility in the rupee. According to RBI data, for the week ended February 14, 2025, India's foreign currency assets (FCA), a major component of the forex reserves basket, decreased by $4.515 billion to $539.591 billion.

Also Read: RBI to conduct $10 billion forex currency exchange to infuse liquidity in India’s banking system

Changes in FCA (FCA being expressed in dollar terms) are caused by the central bank's intervention in the forex market and the appreciation or depreciation of foreign assets (non-US units) such as the euro, pound and yen held in the forex reserves. 

India's gold reserves, however, increased by $1.942 billion to $74.15 billion during the week. The Special Drawing Rights (SDRs) were up by $19 million to $17.897 billion. India's reserve position with the International Monetary Fund (IMF) was up by $14 million at $4.083 billion in the reporting week. India's forex reserves also includes India's reserve tranche position in the IMF.

Also Read: Rising US yields, global trade tensions draw FPIs away from Indian stock market. Will outflows persist?

Rupee vs US Dollar

The Indian rupee has been under pressure amid sluggish economic growth, a recent interest rate cut, foreign outflows from stocks and concerns of a global trade war following US President Donald Trump's tariff plans. The domestic unit ended at 86.7125 against the dollar on Friday and was up 0.1 per cent on week.

In the week for which the reserves data pertains, the rupee slipped to its all-time low of 87.95 against the dollar, but the fall was limited as the central bank intervened by selling dollars in the spot market. The intervention helped the rupee gain 0.7 per cent during the reported week, the most since mid-July 2023.

“Rupee traded weakly at 0.05 ₹at 86.70 despite the dollar index slipping to 106.60$, as FII selling continued, keeping pressure on the currency,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities. “Additionally, reports of a potential reduction in import taxes on EVs added further strain on the rupee, as it could impact trade balances.”

"Going forward, the domestic currency unit is expected to trade between 86.45 and 87.10, with global sentiment and foreign capital flows playing a key role in determining its direction," added the commodity analyst.

Also Read: FPIs withdraw ₹21,272 crore from equities in Feb; total outflow nears ₹1 lakh crore in 2025

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