Economy

Published: Apr 15, 2023
Updated: Apr 15, 2023

India's Forex Reserves Jump to Nine-Month High, Rupee Climbs Against US Dollar

India's foreign exchange reserves surged by $6.3 billion to reach a nine-month high of $584.76 billion for the week ending on April 7, as per the Reserve Bank of India's (RBI) statistical supplement. The increase was primarily due to the rise in foreign currency assets, which climbed by $4.74 billion to $514.431 billion. Meanwhile, gold reserves rose by $1.496 billion to $46.696 billion, and the Special Drawing Rights (SDRs) were up by $58 million to $18.45 billion.

The country's forex reserves had reached an all-time high of $645 billion in October 2021. However, they had been declining as the RBI used them to defend the rupee against pressures caused by global developments. Notably, the rupee ended 0.3% higher against the US dollar for the reported week, trading in a range of 81.8300 to 82.4550.

Foreign Currency Assets Record Strong Growth

Foreign currency assets, a major component of India's forex reserves, saw a significant uptick during the reporting week, driven by an increase in valuation. This component includes the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in the forex reserves. The rise in foreign currency assets contributed $4.74 billion to the overall increase of $6.3 billion in forex reserves.

Gold Reserves Also Register Growth

India's gold reserves increased by $1.496 billion to $46.696 billion for the week ending on April 7. The country has been investing in gold reserves in recent years to diversify its forex reserves and reduce its dependence on the US dollar. The RBI has been buying gold since December 2017 to hedge against inflation and currency risks.

SDRs and Reserve Position with IMF

The SDRs, which represent an international reserve asset created by the International Monetary Fund (IMF), increased by $58 million to $18.45 billion during the reporting week. The country's reserve position with the IMF also rose by $13 million to $5.178 billion.

Rise seen as a positive development for India's economic growth

India's forex reserves increased to a nine-month high, driven by strong growth in foreign currency assets and gold reserves. The rupee also climbed against the US dollar, ending its fourth consecutive weekly rise. The rise in forex reserves is a positive development for India's economy, indicating its ability to withstand external shocks and volatility in the currency market.