According to the Reserve Bank of India’s report on sources of variation in foreign exchange reserves, foreign exchange reserves decreased by $3.3 billion in the first quarter of 2010-11.
Accretions
This fall was mainly because of valuation losses to the tune of $7 billion. However, the decrease in the reserves was limited due to an accretion of $3.7 billion through capital inflows.
Foreign currency assets, the main component of forex reserves, expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies.
Dollar impact
There was a valuation loss as the US dollar had appreciated against other major currencies in the period under consideration.
In the year-ago period, foreign exchange reserves had increased by $13.2 billion, on the back of valuation gains of $13.1.
