India’s foreign exchange reserves rose by $4.84 billion in the week ended June 27, bringing the total to $702.78 billion, according the latest data released by the Reserve Bank of India (RBI).
This figure has inched the country’s forex reserves to its highest level that was achieved in September’s last week in 2024 of a whopping $704.89 billion.
Even though the foreign currency possessions gained, the country’s gold reserves have fallen by $1.23 billion to $84.5 billion.
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The foreign currency assets, on the other hand, surged by $5.75 billion to $594.82 billion. These assets are expressed in dollar terms and are affected by the impact of the appreciation or depreciation of other currencies such as the Euro, Pound, and Yen that are held by India in its reserves.
In the previous reporting week ended June 20, the forex reserves had dropped by $1.01 billion to $697.93 billion. This marks a strong rebound in the current forex levels from late January, when reserves had fallen to a multi-month low of around $624 billion.
Special drawing rights (SDRs) rose by $158 million to $18.83 billion during the week ended June 27.
India’s reserve position with the IMF also saw an increase of $176 million to $4.62 billion, according to the RBI data released on July 4.
However, despite the rise in the reserves, RBI’s forward dollar book that represents future dollar obligations fell by $19 billion in April and May, showing a shrinkage to $65.2 billion in May from a record $88.7 billion in February. The RBI’s net dollar sales during the same period were relatively modest at $3.2 billion.
The forward book figures can offset part of the comfort provided by headline reserves, as they reflect future dollar outflows.
The rupee, which has seen increased volatility since April amid global trade tensions, has also been supported by the RBI intervention.
The central bank strategically buys dollars when the rupee is strong and sells them when it weakens to smooth out volatility and prevent steep depreciation.
Former RBI Governor Sanjay Malhotra said India’s forex reserves were adequate to cover 11 months of imports and 96 per cent of the country’s external debt, underlining the strength of India’s external position.
A healthy forex buffer not only enhances investor confidence but also supports the rupee amid global headwinds.
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