Kolkata: In a bid to prevent India's local currency from slipping further, the Reserve Bank has been prompted to sell more dollars. The move has impacted India's foreign exchange, with reserves shrinking by $1.757 billion.
India's reserves post the exercise have been reported at $406.6 billion. This was nearly $20 billion lesser than the all-time high of $426.08 billion reported by a RBI data on April 13.
A forex dealer quoted by news reports says, "Since then, the forex reserves dipped almost every week amid dollar outflows on concerns over India's widening current account deficit on higher crude prices."
Although OPEC cartel agreed to improve supplies by nearly one million barrels per day, prices are still at a high. And this has impacted India's crucial forex reserves, owing to major crude payments.
Persistent outflows of dollar amid slow inflows has also created stability issues for the local currency. It has so far lost 8% in 2018, and is fast turning out to becoming the worst performing Asian currency.
Moodys Investors Service shared a note, "We also consider higher oil prices to be a risk to growth, but risks to sovereign credit dynamics from oil has diminished in recent years following subsidy reforms to petroleum and diesel fuel."
The agency added, "We do not expect oil prices to remain elevated for an extended period, but this possibility remains a downside risk."
With Agency Inputs