India’s foreign exchange reserves rose by $7.26 billion to $674.19 billion in the week ended July 3, driven by an increase in foreign currency assets (FCAs) and gold reserves, according to data released by the Reserve Bank of India (RBI) on Friday.
FCAs, the largest component of the reserves, increased by $4.51 billion to $545.58 billion during the week. Expressed in dollar terms, FCAs reflect the impact of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in the reserves.
“RBI foreign currency reserves increased by $4.4 billion during the fortnight, indicating the desire of the RBI to also recoup foreign exchange reserves,” the State Bank of India said in a report.
A dealer at a state-owned bank added, “The RBI has been absorbing dollar flows, which has helped replenish reserves. There have been inflows, but the central bank has been taking a significant share of those dollars.”
Gold reserves rose by $2.67 billion to $105.21 billion during the week. Special Drawing Rights (SDRs) increased by $65 million to $18.62 billion, while India’s reserve position with the International Monetary Fund (IMF) rose by $15 million to $4.79 billion, the RBI data showed.
The country’s forex reserves had declined by $5.65 billion to $666.93 billion in the previous reporting week. They had touched a record high of $728.49 billion in the week ended February 27 before falling as the RBI intermittently sold dollars to curb excessive volatility in the rupee. In June, the central bank resumed dollar purchases amid sustained foreign exchange inflows, helping rebuild the reserves.
Meanwhile, the rupee ended nearly unchanged against the US dollar on Friday, supported by lower crude oil prices and a weaker greenback. It settled at 95.33 per dollar, compared with 95.38 per dollar in the previous session.
However, the domestic currency weakened about 0.1 per cent during the week as lingering geopolitical tensions in West Asia kept market participants cautious.