Covid - 19 Impact: The 12th largest weekly decline in the country's forex reserve

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Mumbai, Ta. 28 March 2020, Saturday

Due to the impact of Covid-I, the country's forex reserve has witnessed the biggest weekly decline in the last five years in the week ended March 8. The forex reserve fell $ 1.8 billion over the weekend of March 7, the Reserve Bank data showed. The RBI had to intervene to curb the rupee against the dollar and sell it to increase the flow of the dollar. As a result of heavy selling in the capital market, the rupee has fallen at a historic low. The possibility of erosion in the forex reserve is not ruled out in the coming weeks.

Global funds are investing in safe investments by withdrawing their investments from emerging markets. At the end of March 1, the country's forex reserve had fallen to $ 1.8 billion. Earlier in the global financial crisis of 2, forex reserves fell by $ 2 billion in the week of October 9. At that time, as the money markets collapsed, global fund houses had taken over from emerging markets.

Global funds are avoiding risk taking due to coronavirus and withdrawing their investment from emerging markets. Foreign investors are thought to have withdrawn $ 2 billion from Indian markets in the first three weeks of March. It is expected to withdraw an estimated $ 2 billion in the week of March 7.

The stock market's major indices have been eroded due to heavy selling by investors. The rupee has depreciated by three percent against the dollar in the last three weeks. The Reserve Bank currently has a substantial amount of Forex Reserve and to prevent the rupee depreciation, it can meet the external debt situation even if it sells the Reserve for as much as $ 2 billion.

In the 5th, the country's forex reserve increased by $ 2 billion. The country's forex reserve includes some other foreign currencies besides gold. Gold prices dropped in the week of March 7. However, it has rebounded in the past week.

Forex reserves are also likely to decline in the coming weeks as the money markets around the world are shaken due to coronavirus. Beginning this year, the country's forex reserve has seen significant growth. The $ 1 billion Forex Reserve is claimed to be enough to meet the country's six-month import bills.

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