India’s foreign exchange reserves, USDMIX, increased for the seventh consecutive week and touched $700 billion-plus for the first time due to a higher rise in values and dollar purchases by the central bank.
In the week to September, the reserves increased by $12.6 billion, reaching $704.89 billion.
New figures from the Reserve Bank of India (RBI) published on Friday revealed that the weekly rise was the highest since mid-July 2023 on the 27th.
India is the fourth country in the world, after China, Japan, and Switzerland, whose foreign exchange reserves have crossed the $700 billion figure.
It started accumulating forex reserves in 2013 when foreign investors pulled out of the country due to frail macroeconomic factors.
Since then, inflation has been well-checked. The growth and the closely related shortage of financial and deposit accounts have helped to attract foreign funds and build the reserve.
This year, foreign inflow was $ 30 billion, mainly in J.P. Morgan’s key benchmark and primarily in local currency debt. “If the Reserve Bank of India has enough firepower, adequate forex reserves can help reduce the volatility of the Indian currency,” Gaura Sen Gupta, an economist at IDFC First Bank, said.
‘In addition, it increases investors’ confidence, and there cannot be massive capital withdrawals as most of the stock is owned by the public.’
India’s foreign exchange reserves are projected to gain $87.6 billion in April 2024, up from nearly $62 billion for the entire year 2021. He attributed last week’s increase to $4.8bn in buys made by the Reserve Bank of India and a $7.8billion rise in value.
She attributed the increase in value to falling U.S. Treasury yields, a weakening dollar, and increasing gold prices. In the week that coincided with the latest reserves data, the rupee was trading above 83.50 per dollar, which probably induced the RBI to prop up its reserves.
Since April of the current fiscal year, RBI has consistently participated actively in both sides of the market to contain the rupee back in the trading channel, making it the least volatile compared to other emerging markets currencies. In the letter last month, Governor RBI Shakti kanta das asked that he was asked about the absence of Volatility in Lupie, stating that too much Volatility would not be suitable for the economy.
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