India's forex reserves rose by $963 million to $672.587 billion for the week, reversing a sharp decline witnessed the previous week, the Reserve Bank of India (RBI) said in a release. The rebound was mainly attributable to a large increase in the country's gold reserves that more than compensated for the drop in foreign currency assets.
Key Highlights
- India's forex reserves rose to $672.59 billion, driven by a sharp increase in gold holdings valuation.
- Gold reserves surged over $4 billion, offsetting declines in foreign currency assets during the reporting week.
Forex reserves shrank by $9.985 billion in the previous week, to reach $671.625 billion. The hike is indicative of a return to external stability amid global market volatility in the Indian economy.
Gold Reserves Offset Decline in Foreign Currency Assets
The largest part of India's forex reserves, Foreign Currency Assets (FCAs), fell 3.072 billion dollars to $541.217 billion in the reporting week. FCAs are priced in USD and are affected by changes in the exchange rates of key currencies like euro, pound sterling and Japanese yen to USD.
But the drop in FCAs was offset by a significant increase in the valuation of India's gold stocks. The value of gold reserves rose by $4.110 billion to $107.930 billion, driven by gains in the value of gold and higher international bullion prices.
Also Read: India's Forex Exchange Reserves Fall Nearly $10 Bn to $671.6 Bn
SDRs and IMF Reserve Position Edge Lower
The amount of Special Drawing Rights (SDRs) held by India at the International Monetary Fund (IMF) decreased by $52 million to $18.647 billion in the past week.
At the same time, the country's reserve with the International Monetary Fund (IMF) declined slightly by $22 million to $4.793 billion.
Though there is a short-term volatility in forex reserves, the level of India's currency reserves is still high enough, which give the RBI a good cushion to curb the volatility of currency and global economic shocks.
