Foreign reserves decrease to a more than three-month low of $560 billion.

The Reserve Bank of India’s (RBI) data supplement revealed on Friday that foreign exchange reserves dropped $2.4 billion to $560 billion for the week ending March 10, its lowest level since early December. After dropping steadily during the whole month of February, the foreign exchange reserves increased $1.45 billion to $562.4 billion last week.

According to RBI data, the largest component of foreign exchange reserves, foreign currency assets, decreased by $2.22 billion to $494.8 billion during the review period, while gold reserves decreased by $110 million to $41.92 billion. The SDRs also decreased by $53 million week over week to $18.12 billion.

The U.S. labour market is still tight, therefore the Federal Reserve is likely to raise rates by 25 basis points (bps) on Wednesday. Investors are keeping an eye on the Federal Reserve’s dot plot to see how many additional rate increases it might signal. In the wake of the banking crisis, when a 50 bps increase was priced in, several market participants have called for a halt to the tightening cycle.

As a result of a risk-on surge in international markets following the U.S. government’s rescue of First Republic Bank, the USD/INR spot rate ended the day 17 paise lower at 82.55. The U.S. Fed meeting, where they are anticipated to raise rates by 25 basis points, will be in the spotlight over the coming week. We should therefore anticipate significant volatility in USD/INR. Anindya Banerjee, VP of Kotak Securities, predicted a spot range between 82.10 and 82.90.

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