India's forex reserves see sharpest weekly drop on record, hit over four-month low

India's forex reserves hit record low due to U.S. election impact, central bank intervention, and rupee depreciation.

India’s foreign exchange reserves logged their sharpest weekly fall on record to a more-than-four-month low last week, as the dollar strengthened following the U.S. election verdict, and the central bank sold from its reserves to limit the rupee’s decline.

The reserves fell by $17.8 billion in the week of Nov. 15 – the most since available data starting 1998 - to $657.89 billion, data from the Reserve Bank of India (RBI) showed on Friday.

Forex reserves have fallen by a total of nearly $30 billion in the last six weeks and are down by $47 billion from the record high of $704.89 billion hit in late September.

Changes in foreign currency assets are caused by the central bank’s intervention in the forex market as well as the appreciation or depreciation of foreign assets held in the reserves.

The outcome of the U.S. elections boosted the dollar and U.S. bond yields, leading to revaluation losses. Revaluation loss for the reporting week is estimated at $10.4 billion, while the RBI may have net sold dollars’ worth $7.2 billion in the week of Nov. 15, said Gaura Sen Gupta, India economist at IDFC FIRST Bank.

The rupee fell to its then-record low of 84.4125 last week against the dollar. The currency settled at 84.4450 on Friday, after hitting an all-time low of 84.5075 earlier in the session.

Persistent outflows from Indian equities have also kept the rupee under pressure. Foreign investors have net sold local stocks and bonds worth more than $4 billion in November so far, after withdrawing $11.7 billion in October.