Forex kitty swells by $14.7 bn, biggest rise since Aug 2021

Foreign exchange reserves jumped by a whopping $14.7 billion for the week ended November 11, its biggest weekly increase since August 2021. The last time forex reserves shown a jump of this magnitude was for the week ended August 27, 2021, when reserves had increased by $16.6 billion.  

Reserves have reported a weekly increase six times so far in FY23. Prior to this, they had risen by $6.6 billion for the week ended October 28.  

Forex reserves stood at $544.7 billion for the reporting week, according to the latest data from the Reserve Bank of India (RBI). The increase was mainly on account of a jump of $11.8 billion in foreign currency assets and $2.6 billion in gold assets.

Also Read: GDP growth seen at 6.1-6.3% in Q2: RBI 

The rise in forex reserves typically happens due to US dollar forward contracts entered into by the RBI and appreciation of other foreign currency assets such as euro, pound and yen against the greenback. Other foreign currency assets are also expressed in dollar terms in the RBI’s forex chest. The dollar index, which measures the dollar movement against six major currencies, increased 0.17% during the week ended November 18, according to Bloomberg data. The index witnessed sharp movements during the week, sliding on account of lower-than-expected retail inflation data in the US, but later recovered after robust retail sales data, triggering pullback from the softening inflation outlook.

Despite the increase in forex reserves for the week ended November 11, the kitty is lower than the $640-billion level, where the RBI created buffers to intervene in the currency markets to prevent excess volatility in the rupee.

RBI governor Shaktikanta Das had earlier said it was incorrect to say the central bank indiscriminately uses foreign exchange reserves. So far, the country’s foreign exchange reserves have fallen by $95 billion on a year-on-year basis.

Reserves had fallen to their lowest levels since July 2020 to $528 billion for the week ended October 14, from an all-time high of $645 billion in October 2021.