India’s foreign exchange reserves (forex) increased $2.951 billion to $645.583 billion for the week ended March 29, data released by the the Reserve Bank of India (RBI) showed on Friday, April 5. This is the sixth consecutive week of a jump in overall reserves, after having risen by a total of $26.5 billion in the previous five weeks. The forex kitty had increased $140 million to $642.631 billion in the previous reporting week, according to RBI data.
“It is our prime focus to build a strong umbrella, a strong buffer in the form of a substantial quantum of forex reserves which will help us when the cycle turns or when it rains heavily,” RBI Governor Shaktikanta Das said on Friday.
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The country’s forex kitty had in September 2021 reached an all-time high of $642.453 billion. The reserves took a hit as the central bank deployed the kitty to defend the rupee amid pressures caused majorly by global developments since last year.
For the week ended March 29, the foreign currency assets (FCA), a major component of the reserves, increased $2.354 billion to $570.618 billion, according to RBI data. Expressed in dollar terms, the FCA include the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in the foreign exchange reserves.
Changes in FCA are caused by the RBI’s intervention as well as the appreciation or depreciation of foreign assets held in the reserves. RBI intervenes in the foreign exchange market to curb excess volatility in the rupee.
Gold reserves increased $673 million to $52.16 billion during the week, said the RBI. The Special Drawing Rights (SDRs) were down $73 million to $18.145 billion. Forex reserves also include India’s reserve tranche position in the International Monetary Fund (IMF). India’s reserve position with the IMF was also down $2 million to $4.66 billion in the reporting week.
Despite India’s strong growth and inflows into equity and debt markets, the central bank has been absorbing inflows to build reserves. In the week that the foreign exchange data pertains, the rupee had hit a record low of 83.45 against the US dollar, but clocked minor weekly gains. The domestic currency settled at 83.2950 on Friday, rising 0.1 per cent this week.
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Read More: India’s forex reserves rise for sixth straight week, jump $2.6 billion to hit