India's foreign exchange reserves took a downturn, falling by $2.54 billion to $635.72 billion as of February 14, breaking a three-week streak of gains. This marks the lowest level in over a month and raises concerns about currency stability amid global economic fluctuations.

The decline in reserves is attributed to the Reserve Bank of India's (RBI) intervention in the forex market, alongside changes in the valuation of foreign assets. During the reporting week, the Indian rupee experienced volatility, depreciating to an all-time low of 87.95 against the U.S. dollar. However, it later rebounded slightly, supported by the central bank's actions to stabilize the currency.

India’s forex reserves primarily consist of foreign currency assets, gold reserves, Special Drawing Rights (SDRs) with the International Monetary Fund (IMF), and the Reserve Position in the IMF. A reduction in reserves generally indicates capital outflows, increased demand for foreign currency, or valuation losses due to global financial movements.

The RBI has historically intervened in the forex market to curb excessive fluctuations in the rupee's value. With global economic uncertainty, including shifts in U.S. interest rates and geopolitical tensions, emerging market currencies like the Indian rupee remain vulnerable to depreciation pressures. The recent drop suggests the RBI was actively selling dollars to prevent further weakening of the rupee.

Despite the decline, India's forex reserves remain among the highest globally, providing a strong buffer against external economic shocks. Analysts suggest that continued interventions might be necessary to maintain currency stability and investor confidence.

Looking ahead, traders and investors will closely monitor RBI’s policy moves, global interest rate trends, and economic indicators for further insights into India’s forex market trajectory.