India’s foreign exchange holdings continued their upward trend for the fifth consecutive week, reaching a new record high of $642.631 billion in the week ending March 22, according to the latest figures from the RBI. The increase of $139 million was noted during this period. Furthermore, the gold reserves saw an increase, moving up to $51.487 billion from $347 million previously.
However, the major portion of the forex reserves, the Foreign Currency Assets (FCA), witnessed a slight dip by $123 million, settling at $568.264 billion, as revealed by the RBI’s weekly statistical update.
Leading up to the week concluding on March 22, the forex reserves experienced a growth of $6.396 billion. Throughout 2023, the RBI has successfully augmented its forex reserves by approximately $58 billion. Conversely, in 2022, there was a cumulative decline of $71 billion in the nation’s forex reserves.
The last peak of India’s foreign exchange reserves was recorded in October 2021. The subsequent decrease was largely due to the heightened costs of imports in 2022.
Forex reserves are crucial financial assets maintained by a country’s central bank or monetary authority, predominantly in reserve currencies such as the US Dollar, with the Euro, Japanese Yen, and Pound Sterling also playing significant roles.
Adjustments in the value of foreign currency assets are influenced by the fluctuations in the value of other currencies within the reserves. These reserves encompass India’s Reserve Tranche position with the International Monetary Fund.
The RBI periodically engages in market interventions, including selling dollars for liquidity management purposes, aimed at curbing excessive depreciation of the rupee.
The RBI’s strategy involves careful monitoring of the forex markets, intervening as necessary to ensure smooth market operations by curbing undue fluctuations in the rupee, without adhering to a fixed target level or range. On the closing day of the week mentioned, the rupee stood at 83.40 against the dollar, with financial markets closed the following Friday due to a holiday,
