Forex: India’s foreign exchange reserves reaches new record high of $692.296 billion
New Delhi| The country’s foreign exchange reserves rose by $2.838 billion to a new record high of $692.296 billion in the week ending September 20, according to data released by the Reserve Bank of India (RBI) on Friday. Foreign exchange reserves last week were $689.458 billion.
Foreign exchange reserves have increased by about $69 billion since January so far this year. This buffer of foreign exchange reserves helps protect domestic economic activity from global shocks. India’s foreign currency assets (FCAs), the largest component of foreign exchange reserves, stood at $605.686 billion during the week under review, according to the latest data from the top bank. Gold reserves currently stand at $61.988 billion, according to Friday’s data.
In the year 2023, India had added about US$58 billion to its foreign exchange reserves. In contrast, India’s foreign exchange reserves had fallen by USD 71 billion in 2022. Forex reserves, or foreign exchange reserves, are assets held by a country’s central bank or monetary authority. Foreign exchange reserves generally hold reserve currency, usually consisting of US dollars, to a lesser extent reserves of euros, Japanese yen and pounds sterling.
The Reserve Bank of India closely monitors the foreign exchange markets and intervenes to control excessive exchange rate volatility. RBI often intervenes in the market through liquidity management, including the sale of dollars, to prevent a sharp decline in the value of the rupee. A decade ago, the Indian rupee was one of the most volatile currencies in Asia. However, after that it has become one of the most stable currencies. This change is a testament to India’s growing economic strength and the management of the Reserve Bank of India (RBI).
RBI is strategically buying the dollar when the rupee strengthens and selling when it weakens. This intervention reduces large fluctuations in the value of the rupee, thereby stabilizing it. The less volatile rupee makes Indian assets more attractive to investors.