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India's Forex reserve falls for 2nd consecutive week, raising concerns

In a worrying trend, India's foreign exchange reserve has experienced a decline for the second consecutive week, causing concerns among economists and policymakers. The country's foreign exchange reserves play a crucial role in maintaining stability in the economy and meeting external obligations, making this decline a matter of significance.
According to the latest Reserve Bank of India data, India's forex reserves stood at $589.138 billion, after falling $4.339 billion in the week ending on May 26. In the week ending on May 19, India's foreign exchange reserves declined by $6.052 billion to $593.477 billion, claimed reports.This was the biggest weekly fall in the past three months. 
The recent decline in India's foreign exchange reserves shows that the central bank has been intervening to shore up the Indian rupee, which ended at 82.3 on Friday, according to sources.
Due to stronger US dollar, the rupee declined by 1.1 percent in the month of May, according to recent updates.This was the biggest one-month drop in the Indian rupee this year.
Furthermore,reports suggest that the RBI will maintain the interest rate at 6.5 percent during its upcoming June 8 announcement, considering the easing of retail inflation in April and the potential for further decline. However, with the Indian rupee hovering near the 83 per dollar mark, the RBI may be forced to hike the interest rate to support the currency. 
The latest forex figures come just days before India's central bank is expected to announce its latest monetary policy.
It remains to be seen how India tackles this challenge and whether corrective actions will help stabilize the forex reserve position in the coming weeks. The government's policy decisions, along with global economic conditions, will play a significant role in determining the trajectory of India's foreign exchange reserves and its overall economic health.
(Writer is a Finance Research Analyst, based in Gandhinagar, Gujarat)

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