India's Forex Reserves Fall To $682.1 Billion, Lowest Since August

India's foreign exchange reserves fell to the lowest since August but remained strong.

The forex reserves declined by $2.675 million to $682.1 billion for the week-ended Nov. 1, according to the Reserve Bank of India's weekly statistical supplement, released on Friday.

The forex reserves fell as the RBI continued to sell dollars, said Anil Bhansali, head of treasury at Finrex Treasury Advisors. The foreign portfolio investors were gold buyers, even as they sold $2.4 billion worth of shares in the week ended Nov. 1, he said.

The rupee also continues to breach record lows amid a surge in the dollar index following Donald Trump’s victory in the US presidential election. His plans, including trade tariffs and tax cuts, may lead to inflationary pressures and dampen the Federal Reserve's rate cut cycle, say analysts.

The RBI is likely to continue active intervention in the forex market to stall the depreciation pressure on the rupee and prevent any panic run offs, according to a research note by HDFC bank.

That said, it would likely refrain from fighting against the wind and strongly defending any specific levels for the pair, the note added. "Moreover, given overvaluation concerns and to keep the rupee competitive – especially with a weakening Yuan – the central bank could prefer an orderly depreciation in the rupee over the coming year."