India’s foreign exchange reserves continue to rise and are edging towards USD 600 billion, hitting a nearly one-year high.
In the week that ended on May 12 for which data is available, the reserves rose by USD 3.553 billion to USD 599.529 billion. Prior to the May 12 week, they rose by USD 7.196 billion to USD 595.976 billion, RBI data showed.
Coming back to RBI’s latest data, India’s foreign currency assets, the biggest component of the forex reserves, rose by USD 3.577 billion to USD 529.598 billion.
Gold reserves during the latest week rose by USD 38 million to USD 46.353 billion.
In October 2021, the country’s foreign exchange reserves touched an all-time high of about USD 645 billion.
Much of the decline since then can be attributed to a rise in the cost of imported goods in 2022.
Also, the forex reserves had fallen largely because of the RBI’s intervention in the market to defend the depreciating rupee against a surging US dollar.
Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing 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.