NEW DELHI: India’s foreign exchange reserves extended their gains for the third straight week, after having slumped for about four months. In the week that ended on February 7, the forex kitty rose $7.65 billion to $638.261 billion, Reserve Bank of India data showed Friday.
Barring the latest three weeks, the country’s forex reserves had fallen in 15 of the 16 weeks, hitting an about 11-month low. The forex reserves started falling since they touched an all-time high of $704.89 billion in September. They are now about 10 per cent lower from its peak.
The decline in reserves is most likely due to RBI intervention, aimed at preventing a sharp depreciation of the Rupee. The Indian Rupee is now at or near its all-time low against the US dollar. The latest RBI data showed that India’s foreign currency assets (FCA), the largest component of forex reserves, stood at $544.106 billion. Gold reserves currently amount to $72.208 billion, according to RBI data.
Estimates suggest that India’s foreign exchange reserves are sufficient to cover approximately 11 months of projected imports. In 2023, India added around $58 billion to its foreign exchange reserves, contrasting with a cumulative decline of $71 billion in 2022. In 2024, the reserves rose by a little over $20 billion.
Foreign exchange reserves, or FX reserves, are assets held by a nation’s central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.
The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The RBI strategically buys dollars when the Rupee is strong and sells when it weakens. (ANI)