India’s Foreign Exchange: After experiencing a persistent decline for several months due to the depreciation of the rupee and the Reserve Bank of India’s (RBI) involvement in the currency markets, India’s foreign exchange reserves increased for two weeks in a row.
India’s Foreign Exchange: Key Points
- According to information provided by the RBI, the reserves rose by $2.5 billion to $544.7 billion in the week ending November 18.
- Due to a noticeable increase of $14.7 billion in the prior week, the foreign reserves climbed by a total of $22.7 billion during the preceding four weeks.
- Reserves decreased by $93.1 billion year over year and by $60 billion when compared to levels as of March 31.
- The rise in foreign currency assets, which increased by $1.76 billion in the week ending November 18, was the main driver of the increase in reserves.
- In addition to the currency assets, the special drawing rights (SDR) and gold reserves both climbed throughout the week, contributing to the rise in the forex reserves by a combined $351 million.
India’s Foreign Exchange Rise
The central bank also has reserves in the form of dollars in the form of the euro, pound, and yen. During the past week under review, the dollar index rose 0.25 percent. The index monitors the movement of six important currencies against the dollar, including the euro, pound sterling, Canadian dollar, yen, kroner, and Swiss franc. The yuan lost value versus the dollar when the Chinese central bank revealed its monetary policy last week, keeping the policy rates steady. The RBI’s purchase of dollars or the appreciation of other currencies in the forex reserves relative to the dollar could be to blame for the rise in reserves.
The week ended November 18 saw a 0.54% decline in the value of the Indian rupee as well. According to Soumya Kanti Ghosh, group chief economic adviser at State Bank of India (SBI), the Indian currency is anticipated to trade in the 80–82 range in Q1FY24. Ashima Goyal, a member of the RBI’s Monetary Policy Committee, forecasts that the rupee will weaken to 83 in H1FY23 before strengthening in the second half.