The country's foreign exchange reserves declined by USD 915.8 million to USD 399.609 billion in the week to October 5 on account of a fall in foreign currency assets, according to RBI data. This is known as Trilemma or Impossible trinity. In a pure flexible exchange rate regime or floating exchange rate regime, the central bank does not intervene in the exchange rate dynamics; hence the exchange rate is determined by the market. "The social cost of foreign exchange reserves." International Economic Journal.3 (2006 253-266. This broader figure is more readily available, but it is more accurately termed official international reserves or international reserves. Since then, it has been on a slide and is now down by over USD 31 billion as the monetary authority has been selling dollars to contain rupee volatility. According to the Reserve Bank of India's (. In this context, foreigners have the role to choose only the useful tradable goods sectors. Under perfect capital mobility, the change in reserves is a temporary measure, since the fixed exchange rate attaches the domestic monetary policy to that of the country of the base currency. By 2007, the world had experienced yet another financial crisis, this time the US Federal Reserve organized Central bank liquidity swaps with other institutions. A dynamic panel data approach." Review of International Economics.4 (2009 861877.
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6 Below are some theories that can explain this trend. Segment-wise, FCAs - the largest component of the Forex reserves - decreased.63 billion to 389.82 billion during the week under review. In practice, few central banks or currency regimes operate on such a simplistic level, and numerous other factors (domestic demand, production and productivity, imports and exports, relative prices of goods and services, etc.) will affect the eventual outcome. It also includes investments in US Treasury bonds, bonds of other selected governments and deposits with foreign central and commercial banks. National Bureau of Economic Research, 2012. Balance of payments manual. In the reporting week, foreign currency assets, bad days to trade forex a major component of overall reserves, fell by USD 922.4 million to USD 369.076 billion, as per the RBI data. Sovereign Wealth Fund Institute.