“India’s Forex Reserves Surge to Over Two-Year High, Marking Third Consecutive Week of Growth”

India’s forex reserves surged to an over two-year high, marking a third consecutive week of growth, according to the latest data released by the Reserve Bank of India (RBI). The country’s foreign exchange reserves climbed by USD 10.470 billion to reach USD 636.095 billion by the end of the week on March 8.

Before this week, the forex reserves had risen by USD 6.554 billion to USD 625.626 billion. The increase in reserves during the latest period was primarily driven by a substantial rise in India’s foreign currency assets (FCA), the largest component of the forex reserves, which surged by USD 8.21 billion to USD 562.352 billion, as per the central bank’s weekly statistical data.

However, gold reserves experienced a decline during the week, decreasing by USD 2.299 billion to USD 50.716 billion. Despite this, the overall forex reserves continued their upward trajectory, reaching the highest level in over two years.

In the calendar year 2023, the RBI bolstered the country’s forex reserves by approximately USD 58 billion. This increase contrasts with the cumulative slump of USD 71 billion witnessed in 2022.

Foreign exchange reserves, also known as FX reserves, are assets held by a nation’s central bank or monetary authority, typically in reserve currencies such as the US Dollar, Euro, Japanese Yen, and Pound Sterling. These reserves serve as a crucial buffer against economic uncertainties and aid in maintaining stability in the currency exchange markets.

India’s forex reserves had reached an all-time high of about USD 645 billion in October 2021. Subsequent marginal declines were attributed to various factors, including rising import costs in 2022 and periodic interventions by the RBI to mitigate excessive volatility in the exchange rate.

The RBI closely monitors foreign exchange markets and intervenes when necessary to ensure orderly market conditions and prevent abrupt fluctuations in the exchange rate. These interventions, often through liquidity management and dollar-selling activities, aim to maintain stability without adhering to specific target levels or bands.