india-s-forex-reserves-hit-four-month-high-of-658-8-bn

India’s foreign exchange (forex) reserves have risen for the third consecutive week, reaching a more than four-month high of $658.8 billion as of 21 March.

 

According to data released by the Reserve Bank of India (RBI) on 28 March, forex reserves increased by $4.529 billion during the week.

 

This marks a significant recovery following recent declines attributed to revaluation effects and the RBI’s interventions in the forex market aimed at managing volatility in the rupee.

 

In the previous reporting week, India’s forex reserves had risen by $305 million to $654.271 billion. Over the past three weeks, total reserves have grown by $15.6 billion.

 

At their peak, India’s forex reserves reached an all-time high of $704.885 billion in September 2024. However, recent months saw fluctuations due to global economic conditions, currency revaluations, and interventions by the central bank.

 

A major contributor to the increase was foreign currency assets (FCA), which rose by $1.669 billion to $558.856 billion. Expressed in US dollar terms, FCA accounts for fluctuations in non-dollar currencies such as the euro, pound sterling, and yen. These assets are also influenced by the RBI’s market activities.

 

Gold reserves saw a significant rise of $2.883 billion, bringing their total value to $77.275 billion. Meanwhile, Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) declined by $22 million to $18.24 billion.

 

India’s reserve position at the IMF also decreased slightly by $2 million, standing at $4.429 billion for the reporting week.

 

The increase in forex reserves coincided with a strong performance by the Indian rupee, which gained 1.2% against the US dollar during the week under review. This marked the rupee’s best weekly performance in over two years, supported by foreign bank inflows and traders unwinding long-dollar positions.

 

Equity inflows linked to the rebalancing of the FTSE All-World Index were also a contributing factor to the rupee’s gains. On 28 March, the rupee closed at 85.47 per dollar, registering a 0.3% gain for the day and a 2.3% rise in March.

 

The consistent rise in forex reserves signals greater financial stability and improved investor confidence in India’s economy. Analysts suggest that the RBI’s interventions and foreign capital inflows have played a crucial role in stabilising the rupee and strengthening reserves.