India’s Forex Reserves Profit : India’s currency reserves have struck a remarkable milestone, surpassing $609.02 billion as of July 14, the highest in over 15 months, according to figures issued by the central bank on Friday.
The growth in India’s currency reserves comes as a positive indication for the country’s economy amid global uncertainty and problems. Over the past three weeks, the reserves have enjoyed a straight growth, totaling to an outstanding $12.74 billion, the greatest gain in four months. In the preceding two weeks, there was a total rise of $3.08 billion.
Leading economists and financial experts have attributed a substantial amount of this week-on-week growth in forex reserves to revaluation gains generated by the weakness of the U.S. dollar and a drop in U.S. Treasury yields. (Gaura Sen Gupta), an India economist from IDFC FIRST Bank, underlined that changes in foreign currency assets, presented in dollar terms, incorporate the effects of currency appreciation or depreciation of other currencies held in the Reserve Bank of India’s (RBI) reserves.
The remaining spike in forex reserves can be linked to the RBI’s forex purchases in the spot foreign currency markets, as reported by Sen Gupta. He further noted that the central bank seeks to keep the rupee within a tight band throughout the year.
India’s Forex Reserves Profit & Foriegn Investors
Foreign investors have played a vital role in increasing India’s forex reserves. Data from the National Securities Depository Limited indicated that they have purchased a net of $16 billion in Indian equities over the past three months. This influx of foreign investments has allowed the central bank to undertake targeted purchases from the market, greatly contributing to the buildup of reserves.
One crucial point to consider is that the current level of forex reserves, together with the RBI’s forward foreign exchange book of $19.3 billion, is sufficient to cover more than 11 months of imports. This robust financial cushion affords the Indian economy a degree of resilience and stability in the face of external challenges.
The recent week, for which the FX reserves data pertains, showed the rupee enjoying its best performance in four weeks. The currency moved within a band of 81.9300 and 82.6550 during that period, eventually closing at 81.9450 on Friday, with a slight 0.1% gain for the week.
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