India’s forex reserves experienced a notable surge, rising by $4.04 billion to reach $598.897 billion for the week ending September 1, as per data released by the Reserve Bank of India (RBI). This significant increase marked the end of a two-week period of declining reserves and represented the largest gain in nearly two months.
In the preceding reporting week, the country’s overall reserves had seen a slight dip of $30 million, totaling $594.858 billion. It’s worth noting that in October 2021, India’s forex reserves had achieved an all-time high of $645 billion.
The recent fluctuations in reserves can be attributed to the central bank’s actions to safeguard the Indian rupee amid global economic challenges that have persisted since the previous year. For the week ending September 1, the foreign currency assets, a significant component of the reserves, grew by $3.442 billion, reaching $530.691 billion, as per the Weekly Statistical Supplement released by the RBI.
Expressed in U.S. dollar terms, foreign currency assets include the impact of currency appreciation or depreciation of non-U.S. units, such as the euro, pound, and yen, held within the foreign exchange reserves.
Additionally, the data from the central bank indicated that gold reserves increased by $584 million, reaching $44.939 billion. Special Drawing Rights (SDRs) also saw a modest rise of $1 million, reaching $18.195 billion, according to RBI data.
Furthermore, India’s reserve position with the International Monetary Fund (IMF) increased by $12 million to $5.073 billion during the reporting week, as per the provided data.
The RBI intervenes in both the spot and forwards markets to prevent abrupt fluctuations in the value of the rupee. The changes in foreign currency assets, when expressed in U.S. dollar terms, account for the effects of currency appreciation or depreciation of other currencies held within the RBI’s reserves.
During the week covered by the forex reserves data, the Indian rupee experienced a slight decline against the U.S. dollar, trading within a range of 82.5225 to 82.8075, ultimately closing at 82.9450 on Friday, reflecting a 0.4 percent decline for the week.
Various factors, including elevated crude oil prices, higher U.S. treasury yields, and the strength of the dollar index, exerted pressure on the rupee throughout the week. However, a minor rebound on Friday offered some relief. In the near term, experts suggest that 83.30 is the lower limit for the rupee, according to Anindya Banerjee, the head of FX research at Kotak Securities.
Meanwhile, the U.S. dollar was on track for its longest weekly winning streak in nine years, bolstered by strong U.S. economic data that has raised questions about the Federal Reserve’s aggressive rate-hike policy. The U.S. dollar index, measuring the greenback against major peers, remained near its six-month high.
India’s forex reserves rebounded significantly, breaking a two-week decline, as the RBI’s actions to stabilize the rupee amid global economic dynamics continued to impact the nation’s foreign exchange position.