India's forex kitty declines by $778 million to $578.5 billion | Economic Times

India’s foreign exchange reserves declined by $778 million from its record high in the previous week to $578.569 billion in the week of December 11, Reserve Bank of India’s data showed on Friday.The decline in the reporting week was mainly on the back of a fall in the value of foreign currency assets (FCA) held by the central bank, which constitutes a major component of the overall reserves. FCA fell by $1.042 billion to $536.344 billion, the data showed.The FCA reflects appreciation or depreciation of currencies like the euro, pound and yen held in the foreign exchange reserves, expressed in dollar terms. Typically, the value of FCA for a said week is a function of currency depreciation and also the intervention in the currency market by RBI.The central bank’s forex kitty has surged by $4.5 billion to touch an all-time high of $579.346 billion in the week of December 4.Meanwhile, in the week the gold reserves rose by $284 million to $36.012 billion, as per the central bank data.The special drawing rights (SDR) with the International Monetary Fund (IMF) – another component of the forex kitty – fell marginally by $3 million to $1.503 billion. The reserve position with the IMF too reported a marginal decline of $16 million to $4.709 billion during the reporting week, the data showed.Barring a few marginal declines, India’s forex kitty has been on the ascendency in 2020 clocking record volumes several times over the past months. The forex exchange reserve on January 3 was $461.157 billion.The rise in forex reserves is typically a factor of an increase in portfolio investments from offshore investors and also a growth in the foreign direct investments (FDIs) during the period.A strong kitty allows the central bank to timely intervene in forward and spot currency markets to arrest any slide in rupee devaluations. India’s central bank has been shoring up its foreign reserves since over a year and in the process has leapfrogged Russia and South Korea as the third-biggest holder of forex reserves only behind China and Japan.