India’s Foreign Exchange Reserves Surge to Over Two-Year High

India's Foreign Exchange Reserves Surge
India's Foreign Exchange Reserves Surge
India's Foreign Exchange Reserves Surge
India's Foreign Exchange Reserves Surge

India’s Foreign Exchange Reserves Surge to Over Two-Year High

India’s Foreign Exchange Reserves Surge to Over Two-Year High

India’s Foreign Exchange Reserves Surge to Over Two-Year High

India’s foreign exchange reserves saw a significant increase, rising by USD 10.470 billion to USD 636.095 billion in the week ending March 8, according to data released by the Reserve Bank of India (RBI). This marks the third consecutive week of growth, reaching an over two-year high.

Components of the Forex Reserves

During the latest week, India’s foreign currency assets (FCA), the largest component of the forex reserves, increased by USD 8.21 billion to USD 562.352 billion, as per the central bank’s weekly statistical data. However, gold reserves declined by USD 2.299 billion to USD 50.716 billion.

Trend and RBI’s Intervention

In the calendar year 2023, the RBI added about USD 58 billion to its foreign exchange reserves. However, in 2022, India’s forex reserves experienced a cumulative slump of USD 71 billion.

Factors Influencing Forex Reserves

Forex reserves, or foreign exchange reserves (FX reserves), are assets held by a nation’s central bank or monetary authority, typically in reserve currencies like the US Dollar, Euro, Japanese Yen, and Pound Sterling. Despite a marginal decline since hitting an all-time high of USD 645 billion in October 2021, the recent fluctuations in reserves can be attributed to various factors, including the cost of imported goods and the RBI’s interventions to manage currency depreciation.

RBI’s Market Intervention

The RBI closely monitors foreign exchange markets and intervenes as needed to maintain orderly market conditions and contain excessive volatility in exchange rates. This intervention includes liquidity management and selling dollars to prevent steep depreciation of the rupee against the US dollar.

India’s foreign exchange reserves play a crucial role in stabilizing the economy and ensuring financial stability. The recent surge underscores the nation’s efforts to strengthen its forex reserves amidst global economic uncertainties and market fluctuations.

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