Indian Foreign Exchange Reserves (Oct/09) 726.03B (Prev. 734.61B)

Weekly reserve prints from the RBI are one of the cleaner windows into how hard the central bank has been leaning against the rupee, since a falling stock typically reflects spot dollar sales, with valuation effects from the non-dollar share of the portfolio muddying the read in any given week. A decline of this size in a single week points to active defence of the currency rather than passive revaluation alone, a pattern that in past episodes has coincided with the rupee testing levels the RBI has treated as worth defending. The distinction that matters is between drawdowns that are intermittent and quickly rebuilt and those that run as a sustained trend, since the former is routine smoothing and the latter signals a defence that consumes ammunition and eventually forces a choice between the exchange rate and reserve adequacy. What is worth tracking is whether the pace of erosion persists across subsequent prints, the forward book and intervention in the non-deliverable market, and how reserves sit relative to conventional adequacy metrics such as import cover. RBI form historically has been to smooth rather than to defend any particular level, so direction of the trend matters more than any single week. As a flow indicator rather than a policy signal, this is descriptive, not a shift in stance.