India’s foreign exchange reserves increased by a massive $6.6 billion to $531.1 billion for the week ended October 28, marking their biggest weekly gain since September 2021, the Reserve Bank of India’s weekly statistical supplement showed on Friday.
The last time reserves had seen a higher weekly growth was in 2021 — reserves swelled by $8.9 billion to $642.4 billion for the week ended September 10, 2021.
In October 2021, the country’s forex kitty had reached an all-time high of `645 billion.
Forex reserves have been falling for many months as the central bank is intervening in the currency market to prevent volatility. However, two weeks back, foreign exchange reserves had witnessed an increase of $204 million.
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The $6.5-billion increase happened in a week that witnessed the Diwali festivities.
Foreign currency assets (FCA), a major component of the overall reserves, jumped by $5.772 billion to $470.847 billion during the week ended October 28, RBI data showed.
Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
The value of gold reserves increased $556 million to $37.762 billion. The special drawing rights (SDRs) were up by $185 million to $17.625 billion. The country’s reserve position with the IMF was up by $48 million to $4.847 billion in the reporting week.
A slowdown in FPI inflows and weakening domestic fundamentals may have led to the fall in rupee, Aditi Gupta, economist at Bank of Baroda said, adding that the outlook for rupee remains heavily dependent on the greenback’s trajectory.
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The treasury research division of HDFC Bank expects that the Indian currency may head towards 83.50, or maybe even 84.0, in the near-term as the RBI is unlikely to intervene in the market to stall free fall of the rupee.
The rupee will recover once the tide of the rising interest rates in the US is reversed, but for now, the Indian currency, which is market-determined, should be allowed to find its level, RBI governor Shaktikanta Das had said at a recent event.