Mumbai: India’s foreign exchange reserves rebounded during the week ended June 19, rising by USD 963 million to USD 672.587 billion, according to data released by the Reserve Bank of India (RBI) on Friday. The recovery comes after the country’s forex reserves witnessed a sharp decline of nearly USD 10 billion in the previous reporting week.
The latest increase was primarily driven by a significant rise in the value of gold reserves, which offset a decline in foreign currency assets.
Gold reserves drive overall increase
According to RBI data, India’s gold reserves rose by USD 4.110 billion to USD 107.930 billion during the reporting week.
The increase in gold holdings helped compensate for the fall in foreign currency assets, resulting in an overall rise in the country’s forex reserves.
Gold has become an increasingly important component of India’s reserve portfolio, with the central bank steadily increasing its holdings in recent years as part of its reserve diversification strategy.
Foreign currency assets decline
Foreign currency assets (FCAs), which constitute the largest portion of India’s foreign exchange reserves, declined by USD 3.072 billion to USD 541.217 billion during the week ended June 19.
The RBI noted that FCAs expressed in US dollar terms also reflect the impact of appreciation or depreciation in other major currencies such as the euro, pound sterling and Japanese yen held in the country’s reserve basket.
Movements in these global currencies can influence the overall valuation of India’s foreign currency assets even without significant changes in the actual holdings.
SDRs and IMF reserve position slip
The Reserve Bank of India also reported a marginal decline in the country’s Special Drawing Rights (SDRs).
During the reporting week:
- Special Drawing Rights (SDRs): Fell by USD 52 million to USD 18.647 billion
- Reserve position with the International Monetary Fund (IMF): Declined by USD 22 million to USD 4.793 billion
These components form part of India’s overall foreign exchange reserves alongside foreign currency assets and gold reserves.
Recovery follows previous week’s sharp drop
The latest increase comes after India’s forex reserves had fallen by USD 9.985 billion to USD 671.625 billion in the previous reporting week.
Despite weekly fluctuations, India’s foreign exchange reserves remain among the largest globally, providing a strong buffer against external economic shocks and supporting the stability of the Indian rupee.
The RBI closely monitors reserve levels as they play a crucial role in managing exchange rate volatility, meeting external payment obligations and maintaining investor confidence in the country’s economy.
Conclusion
Although foreign currency assets declined during the week ended June 19, a substantial increase in gold reserves helped India’s overall foreign exchange reserves recover to USD 672.587 billion. The latest RBI data highlights the resilience of the country’s reserve position despite short-term fluctuations in global financial markets.
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