(Bloomberg) -- India’s foreign reserves had their biggest weekly fall ever, indicating the central bank likely sold dollars in the market to support the local currency that fell to a record low this week.
The forex stockpile slumped by $17.76 billion to $657.9 billion in the week through Nov. 15, continuing with its declining trend for seven weeks in a row, data from the Reserve Bank of India released Friday showed. That’s the lowest level since July 5.
The rupee has come under pressure on likely foreign outflows from local stocks and the outcome of the US elections that is spurring fears of higher US tariffs on China and other countries. Pressure on the rupee continues with the currency tumbling to close at an all-time low of 84.5013 Thursday.
“Massive outflow of foreign portfolio investors from the markets in the last one month has led the RBI to intervene heavily in the currency markets,” said Madhavi Arora, lead economist at Emkay Global Financial Services Ltd. “Add to it, valuation effect owing to strong dollars pulled down the reserves.”
The central bank has been keeping a tight grip on the rupee this year, trying to insulate India’s economy from global spillovers and financial stability risks by keeping the currency stable.
Governor Shaktikanta Das has said in the past that the central bank intervenes in the markets, but does not target a level. The central bank’s staff recently defended its forex policy saying its interventions need to be adjusted for the economy’s size to draw a “fair conclusion.”
The RBI will continue to closely watch outflows from the markets and the resultant pressure on the rupee, said Kunal Sodhani, vice president of Shinhan Bank Ltd. The central bank will likely continue to curb volatility through such interventions, he said.
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