India's Forex Reserves Rebound After Weeks of Decline
India's Foreign Exchange Reserves Rise Again
India's foreign exchange reserves have started rising again after falling for the eighth consecutive week, reaching a multi-month low. In the week ended November 29, foreign exchange reserves rose by USD 1.510 billion to USD 658.091 billion, data from the Reserve Bank of India (RBI) earlier this week showed.
The reserves had been declining since touching an all-time high of USD 704.89 billion in September. The reserves are declining due to the intervention of RBI aimed at preventing the sharp depreciation of the rupee. Adequate foreign exchange reserves buffer helps insulate domestic economic activity from global shocks.
Latest Data of Foreign Exchange Reserves
The latest data from the RBI showed that India's foreign currency assets (FCAs), which are the largest component of foreign exchange reserves, stand at USD 568.852 billion. According to RBI data, gold reserves currently stand at USD 66.979 billion. Estimates suggest that India's foreign exchange reserves are now sufficient to cover about a year of projected imports. In 2023, India added around USD 58 billion to its foreign exchange reserves, while in 2022 it declined by USD 71 billion.
Holdings Managed by the Central Bank
Foreign exchange reserves, or FX reserves, are assets held by a country's central bank or monetary authority, primarily in reserve currencies such as the U.S. dollar, with a small portion denominated in the euro, Japanese yen, and pound sterling. The RBI monitors the foreign exchange markets closely, intervening only to maintain orderly market conditions and prevent excessive volatility in the exchange rate of the rupee, without following any fixed target level or range.
The Indian rupee used to be the most unstable currency in Asia
The RBI often intervenes by managing liquidity, including selling dollars, to prevent the depreciation of the rupee. A decade ago, the Indian rupee was one of the most volatile currencies in Asia. Since then, it has become one of the most stable currencies. The RBI has strategically bought dollars when the rupee strengthened and sold when it weakened, thereby increasing the attractiveness of Indian assets for investors.
[Agency]