Foreign institutional investors (FIIs) have been pulling out a part of their investment from the volatile domestic stock markets, affecting the level of foreign exchange reserves, said analysts.
Apart from the FII action, demand for foreign exchange from oil companies and importers is also infuencing reserve levels. The Reserve Bank of India was seen selling dollars to keep the rupee below Rs 43 to a dollar.
This week, the rupee depreciated further and breached the 43 mark against the US currency and closed on Friday at 43.15.
Foreign currency assets declined by $694 million to $302.05 billion, according to RBI's Weekly Statistical Supplement.
Foreign exchange reserves had risen by $1.79 billion on June 20 after falling by $4.96 billion in mid-June.
The RBI data also showed that money supply rose 20.7 per cent on a year-on-year basis at the end of June 20, as against 21.4 per cent recored for the fortnight ended June 6. The pace of money supply is well above RBI's indicative projection of 16.5-17 per cent set for 2008-09.
On June 24, the central bank had raised the repo rate by 50 basis points and the cash reserve ratio by a similar proportion to control inflation.
The reserve money increased by 29.9 per cent on June 27 against 24.3 per cent a year ago.
