Finance
Foreign exchange reserves at the Reserve Bank of India increased by $11.02 billion to $561.16 billion in the week ending December 2, reaching their highest level since August 26.
The sharp increase in foreign exchange reserves was primarily due to an increase in the RBI’s foreign currency assets, which increased $9.7 billion to $496.98 billion in the previous week, according to the most recent data.
The data marks the fourth week in a row that the RBI’s reserves have increased. The reserves stood at $530 billion as of November 4. The large increase in reserves coincides with a sharp drop in the dollar index.
The dollar index fell around 6% in November as data showing a larger-than-expected drop in US inflation led to expectations of the Federal Reserve slowing down the pace of its monetary tightening.
The rupee gained 0.45% against the dollar in the week ending December 2, ending the week at 81.32 per dollar. So far in 2022, the domestic currency has fallen 9.6 percent against the US dollar.
With the dollar index declining and emerging market currencies such as the rupee strengthening, analysts believe the RBI has begun replenishing its foreign exchange reserves.
“I believe that, aside from revaluation, the RBI may have purchased the dollar because the dollar index has fallen in the previous week.” The RBI has most likely amassed some reserves. Aside from that, non-dollar assets have increased in value. So, these are the two main factors that have resulted in an increase in forex reserves.” Dilip, a research analyst at HDFC Securities said.
The RBI’s reserves have fallen sharply this year, owing in part to dollar sales by the central bank as it sought to protect the rupee against global headwinds.
On February 25, around the time Russia invaded Ukraine, the RBI’s reserves stood at $631.53 billion, sparking a global flight of investment to the safety of the dollar.
The Reserve Bank of India reported last month that reserves totaling $530 billion as of November 4 covered 8.6 months of projected imports for the current fiscal year.
Source:BS
