Forex reserves surge by over $10 billion to hit over two-year high

The country’s foreign exchange reserves rose to an over two-year high of $636 billion in the week ended March 8, according to the latest data released by the Reserve Bank of India (RBI). The total reserves increased by $10.47 billion in the previous week, which was the highest weekly gain since July 14, 2023.

The reserves rose on account of an increase in foreign currency assets, which grew by $8.12 billion in the week. Foreign exchange traders said the RBI heavily purchased dollars in the spot market during the week, absorbing robust inflows in both debt and equity ahead of the inclusion of government bonds in global indices.

“I think it is a mix of the RBI intervention and valuation,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. “The rupee was appreciating due to inflows; the RBI could have absorbed these inflows,” she said.

The rupee appreciated by 0.1 per cent against the US dollar in the previous week. 

“It is due to a number of factors, like the fall in the Dollar Index during the week and RBI intervention,” said Aditya Vyas, chief economist at STCI Primary Dealer Ltd.

The dollar index fell to around 102 at the end of the week, down from 103 at the start of the week. 

During the week, gold reserves rose by $2.3 billion to $50.72 billion, while special drawing rights (SDRs) were up by $31 million to $18.21 billion.

The reserve position in the International Monetary Fund (IMF) increased by $19 million to $4.82 billion.