This adverse feedback loop between financial conditions and the economy has been a prominent feature of the recession. The Federal Reserve took a two-pronged approach to countering the effects of financial stringency on the economy: We used our conventional policy tools, and we initiated a range of unconventional policy actions to support the extension of credit.
The outflow arises mainly on account of sale of foreign currency to Authorised Dealers (i.e. for open market operations). There are occasions when forex is made available from reserves for identified users, as part of strategy of meeting lumpy demands on forex markets, particularly during periods of uncertainty.