Foreign exchange reserves up $3.854 billion to $601.363 billion
A $3.6 billion increase in foreign currency holdings helped expand the total stock of reserves, touted as a cushion against headwinds in the global economy.
Foreign exchange reserves were $601.4 billion for the week ended May 27 from $597.5 billion the previous week, Reserve Bank of India data, released on Friday evening, showed. The share of reserves held in gold and other assets backed by the International Monetary Fund increased by approximately $244 million.
“The expansion of foreign exchange reserves could be due to revaluation alone, as there were no known foreign inflows into the country,” said Madan Sabnavis, chief economist at Bank of Baroda.
“During the week in question, the dollar index fell against other major global currencies, including the euro and the pound,” he said. “This has led to an increase in the value of cross currencies in which India holds a fair share of foreign assets.”
The exact share of dollar-denominated or other currency assets in RBI’s forex pool is not known. However, it is estimated that more than a third would be made up of non-dollar denominated assets.
For the week ended May 27, the dollar index, which measures unity against a pack of major currencies, fell nearly 1.5% to 101.67.
At home, the rupee was a bit lower at 77.63 against the dollar on Friday, according to data from Bloomberg.
India’s central bank is reportedly looking to keep its foreign exchange reserve at over $600 billion to provide adequate protection during the current commodity super cycle, record inflation in the West and war in Ukraine, potentially ending trade deals. sell-buy currency swap so far used to suck up excess liquidity in rupees, ET reported on May 7.
Foreign exchange reserves had also increased in the week ended May 20, ending nine consecutive weeks of contractions.
The RBI reportedly got a net buy on the outstanding dollar-rupee futures, which triggered the increase in reserves during the week ending May 20.