India’s foreign exchange reserves hit fresh all-time high

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New Delhi: India’s foreign exchange reserves rose for the fifth straight week to hit a fresh all-time high of USD 642.631 billion in the week ending on March 22, as per the latest data released by the Reserve Bank of India (RBI).
Prior to the week that ended on March 22, the foreign exchange kitty rose by USD 6.396 billion.

Coming back to the latest week, India’s foreign currency assets (FCA), the biggest component of the forex reserves, though, declined by USD 123 million to USD 568.264 billion, the central bank’s weekly statistical data showed.
Gold reserves during the week rose from USD 347 million to USD 51.487 billion.

In the calendar year 2023, the RBI added about USD 58 billion to its foreign exchange kitty. In 2022, India’s forex kitty slumped by USD 71 billion cumulatively. Forex reserves, or foreign exchange reserves (FX reserves), are assets that are held by a nation’s central bank or monetary authority.

It is generally held in reserve currencies, usually the US Dollar and, to a lesser degree, the Euro, Japanese Yen, and Pound Sterling. In October 2021, the country’s foreign exchange reserves last touched their all-time high. Much of the decline after that could be attributed to a rise in the cost of imported goods in 2022.

Also, the relative fall in forex reserves could be linked to the RBI’s intervention, from time to time, in the market to defend the uneven depreciation in the rupee against a surging US dollar. Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the sale of dollars, to prevent a steep depreciation in the rupee.

The RBI closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band.

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