According to the latest data from the Reserve Bank of India (RBI), India's foreign exchange reserves fell $2.06 billion in the week ending May 2, breaking an eight-week rising streak.

India’s total forex reserves have declined to $686.06 billion from $688.13 billion a week before.

The largest item in India’s forex reserves, foreign currency assets, rose by $514 million to $581.18 billion.

These assets are quoted in USD and correspond to the currency value of major global currencies, such as the euro, the pound sterling and the Japanese yen.

Nevertheless, the increase in foreign currency assets (FCAs) was made ineffective by a $2.55 million cut back on gold reserves to $81.82 billion.

SDRs, or special drawing rights deposited with IMF declined by $30 million to stand at $18.56 billion.

The central bank also projected that the reserves can cover potential imports of 10 to 12 months.

The current movement is therefore similar to what has occurred since September when the reserves had once again peaked to a record of $704.89 billion before slowly falling back due most likely to the RBI forex market interventions to tame up and down movements and prop up the rupee which is not far from historic lows against the US dollar.

The central bank continues to control liquidity of currency market by selling dollars upon weakening of rupee and accumulating the reserve when the rupee becomes strong.

The forex reserves increased by more than $20 billion last year. In 2023, the forex kitty grew by almost $58 billion and that was a drastic turnaround for the $71 billion drop-off in 2022.

These foreign exchange reserve currencies are held by a nation’s national bank mainly in the reserve currencies of US dollars, Euro, Yen and Pound Sterling among others with minimal amounts in Euros.