India Forex Reserves Extend Decline

Foreign exchange reserves held by the Reserve Bank of India fell to an equivalent of $653 billion in the second week of December, the lowest since June, and extending the decline from the record high of $704.9 billion in the last week of September.

The drop was owed to an outflow of foreign capital as slowing growth in India drove investors to opt out of investments in domestic capital markets, in line with the rebound in G-Sec yields and the pullback on the Sensex, and forcing the RBI to deplete reserves and prevent a sharper decline for the rupee.