2023-05-12 11:41:16
India’s forex reserves reached a 10-month-high of $588.8 billion in the week through April 28, recovering from a drop to $524.5 billion last October, when the rupee hit a record low against the U.S. dollar.
Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. Overall FCA rose by $6.536 billion to $526.021 billion.
Gold reserves saw a rise of $659 million to $46.315 billion while Special Drawing Rights (SDRs) dipped by $19 million to $18.447 billion.
India’s reserve position in the IMF rose by $20 million to $5.192 billion.
Falling for the second straight session, the rupee depreciated by 7 paise to 82.16 against the US dollar on Friday, as a strong greenback overseas weighed on investor sentiments. However, a positive trend in domestic equities and unabated foreign fund inflows cushioned the downslide, traders said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.03 per cent to 101.90.In October 2021, the country’s forex reserves had touched an all-time high of USD 645 billion. The reserves had been declining as the central bank deployed the kitty to defend the rupee amid pressures caused mainly by global developments.
India’s foreign exchange reserves are at a comfortable level currently, benefiting from the Reserve Bank of India’s persistent intervention and the likelihood of less volatile revaluation changes, economists said.
Since October 2022, the RBI has been rebuilding the reserves, taking advantage of the rupee’s recovery. The central bank bought more than $8 billion in the spot market in November and December, according to its data.
The RBI has been buying dollars in the forward market too. Its net outstanding forward dollar purchases reached $20.4 billion in February, the latest month for which data is available, after having dwindled to $241 million in October.
Since October, “comfort on the level of reserves has improved significantly,” said Gaura Sen Gupta, economist at IDFC First Bank.
“Reserves (both spot and forwards) are now equivalent to 10.4 months of import cover, compared with about 8.9% in Oct 2022.”
(With agency inputs)
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