India’s forex kitty dips by $5.9 billion

India’s foreign exchange reserves fell by $5.9 billion to $617.30 billion during the week ended January 5, according to the RBI data released on Friday.

This is the first fall in the country’s forex which had grown steadily by a total of $32.9 billion in the preceding seven weeks to scale a 22-month high.

A strong foreign exchange kitty helps the RBI to control volatility in the rupee.

The central bank intervenes in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall when it comes under pressure.

Apart from the RBI’s intervention, the foreign exchange reserves are also affected by the appreciation or depreciation of foreign assets held in the reserves.