New Delhi: Indias foreign exchange (forex) reserves witnessed a decline, breaking a two-week streak of gains, and stood at $617.23 billion as of February 9, according to data released by the Reserve Bank of India (RBI) on Friday. This drop marks the steepest decline in a month, with reserves falling by $5.27 billion during the reporting week, following a cumulative increase of $6.36 billion over the previous two weeks.Factors influencing forex reservesThe Reserve Bank of India (RBI) actively intervenes in the foreign exchange market to mitigate excessive volatility in the rupees value. Fluctuations in foreign currency assets are attributed to the RBIs interventions and the appreciation or depreciation of foreign assets held in the reserves.Understanding forex reserves compositionIndias foreign exchange reserves encompass various components, including the countrys reserve tranche position in the International Monetary Fund (IMF). During the week under review, the rupee experienced a marginal 0.1% decline against the US dollar, trading within the range of 82.8875 and 83.0700. The domestic currency settled at 83.0150 on Friday, exhibiting minimal change compared to the previous week.Rupee performance and market sentimentDespite the rupees slight appreciation by four paise to settle at 83.01 against the US dollar on Friday, its gains were tempered by the prevailing strength of the American currency and the continued outflow of foreign funds from the Indian market. In the interbank foreign exchange market, the rupee commenced trading at 83.03 and reached an intraday high of 83.00 against the dollar before concluding at 83.01, marking a modest increase of 4 paise from its previous close.Market insights and outlookForex traders highlight the impact of a robust US dollar and ongoing foreign fund outflows as key factors limiting significant gains in the Indian rupee. However, positive sentiments in the domestic equity markets and the softening of crude oil prices have contributed to the rupees resilience amidst prevailing market dynamics.
