India’s foreign exchange reserves declined sharply by $9.8 billion to $686.8 billion in the week ended January 2, marking the steepest weekly fall in more than a year, according to data released by the Reserve Bank of India (RBI).
The sharp drop was primarily driven by a fall in foreign currency assets, which decreased by $7.6 billion to $552 billion during the week. Gold reserves also slipped by $2.1 billion amid a decline in global gold prices.
Economists attributed the decline to active intervention by the central bank to manage volatility in the currency market, as well as valuation losses. The RBI sold an estimated $7 billion worth of dollars to support the rupee amid persistent capital outflows, while the remaining fall was due to revaluation losses linked to weaker gold prices.
India’s forex reserves had earlier touched an all-time high of $705 billion in September 2024. During the reported week, the rupee depreciated 0.38% against the US dollar, while gold prices fell over 4% on a week-on-week basis.
Market participants said the rupee remained under pressure due to sustained foreign outflows, corporate dollar demand and uncertainty around a US trade deal. The RBI is expected to continue intervening to smooth excessive volatility rather than defend any specific exchange rate level.
After weakening nearly 4.7% in 2025, the rupee has extended its losses into January and closed at 90.16 against the dollar on Friday. Analysts warn that global headwinds, potential US sanctions and large maturing forward positions could keep pressure on the currency in the near term.
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