India’s foreign exchange reserves have made an impressive surge, achieving their most substantial weekly increase in the past four months, soaring by an extraordinary $12.74 billion and reaching a remarkable total of $609.02 billion, as reported by the Reserve Bank of India (RBI). The recent surge was primarily driven by a significant boost in Foreign Currency Assets (FCAs), which soared by $11.19 billion, reaching an impressive total of $540.17 billion. FCAs, denoted in dollar terms, encompass the valuation of non-US units like the euro, pound, and yen, held within the foreign exchange reserves.
In conjunction with the surge in FCAs, India’s gold reserves also experienced a notable upswing, rising by $1.14 billion, and now standing at $45.20 billion. Additionally, the nation’s Special Drawing Rights (SDRs) witnessed an increase of $250 million, contributing to a total of $18.500 billion. Furthermore, India’s Reserve Position in the International Monetary Fund (IMF) moved up by $158 million, currently amounting to $5.18 billion.
The Reserve Bank of India (RBI) plays a crucial role in preserving market stability through strategic interventions, including occasional management of liquidity by selling dollars to prevent steep depreciation of the rupee’s value. The central bank diligently monitors foreign exchange markets, intervening only to ensure orderly market conditions and curb excessive volatility in exchange rates, without adhering to any pre-determined target level or band.
According to the RBI’s monthly bulletin data, the central bank purchased $7.37 billion in the spot foreign exchange market during May. In contrast, no dollar sales were reported during the same period. The RBI had previously acquired a net total of $7.70 billion in the spot market in April. These interventions took place amidst a depreciation of over 1 percent in the Indian rupee against the dollar in May.
India’s growing forex reserves showcase the nation’s strengthened economic position and the RBI’s vigilant efforts to maintain financial stability. The substantial surge in reserves serves as a positive signal for India’s economic resilience amid global uncertainties.