India’s Forex Reserves Rebound to $702.78 Billion, Close to All-Time High.
India’s foreign exchange reserves surged by $4.84 billion to $702.78 billion in the week ended June 27, according to data released by the Reserve Bank of India (RBI) on July 4. The uptick brings reserves within touching distance of their all-time high of $704.89 billion, recorded in September 2024.
This marks a significant recovery from the lows of late January, when reserves had dipped to around $624 billion, a multi-month trough.
What Drove the Increase?
The weekly rise was primarily driven by a $5.75 billion jump in foreign currency assets (FCAs), which stood at $594.82 billion.
Gold reserves, however, declined by $1.23 billion to $84.5 billion.
Special Drawing Rights (SDRs) rose by $158 million, reaching $18.83 billion.
India’s reserve position with the IMF also improved, gaining $176 million to stand at $4.62 billion.
Foreign currency assets, denominated in US dollars, reflect changes in the value of non-dollar currencies like the euro, yen, and pound within the basket of assets.
RBI’s Forward Dollar Book Shrinks
While headline reserves have grown, the RBI’s forward dollar book — which represents future dollar obligations — declined by $19 billion over April and May, falling from $88.7 billion in February to $65.2 billion in May.
However, net dollar sales by the RBI during the same period were relatively contained at $3.2 billion.
The shrinking forward book signals potential future outflows, slightly tempering the comfort offered by rising reserves.
Rupee Volatility and RBI Intervention
The Indian rupee has witnessed heightened volatility since April due to global trade concerns. The RBI has continued its policy of intervening in currency markets — buying dollars during rupee strength and selling during weakness — to maintain stability and avoid sharp depreciations.
External Sector Remains Resilient
In its latest monetary policy review, RBI Governor Sanjay Malhotra emphasized the robustness of India’s external position, noting that:
The current reserves are sufficient to cover 11 months of imports.
They account for 96% of India’s external debt.
This solid reserve cushion enhances investor confidence and provides a crucial buffer against global financial turbulence.
In contrast, in the prior week ending June 20, India’s forex reserves had declined by $1.01 billion to $697.93 billion.
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