India's foreign exchange reserves took a significant hit, dropping by $8.714 billion to $625.871 billion in the week ending January 10, as revealed by the Reserve Bank of India on Friday. This marks a continuation of a declining trend, with the previous week witnessing a $5.693 billion dip to $634.585 billion.

The steady decline in reserves is attributed to revaluation effects and the RBI's proactive measures to stabilize the rupee amid global market volatility. Notably, the reserves had soared to a historic high of $704.885 billion in September 2023.

Key Highlights:

Foreign Currency Assets Plunge: The largest chunk of reserves, foreign currency assets, fell by $9.469 billion to $536.011 billion. These assets are impacted by the value of non-US currencies such as the euro, pound, and yen, which make up a portion of the holdings.

Gold Shines Bright: Despite the overall decline, gold reserves increased by $792 million to reach $67.883 billion during the week.

SDRs and IMF Position Dip: Special Drawing Rights (SDRs) dropped by $33 million to $17.781 billion, while India’s reserve position with the IMF declined by $4 million to $4.195 billion.

RBI's Tactical Approach:

In a bold move to manage currency volatility, the RBI sold $20 billion in forex during November alone. With $138 billion more at its disposal, the central bank is well-positioned to continue intervening if market conditions demand.