India’s forex reserves touch four-month high at $604 billion: RBI

India’s foreign exchange reserves continued to remain high for the straight third week and rose to more than a four-month high of $604.04 billion as of December 1, data from the Reserve Bank of India (RBI) showed on Friday.

During the reported week, the reserves experienced a notable increase of $6.1 billion, marking the most substantial gain since the week concluding on July 14. The reserves had collectively risen by $7.6 billion in the two preceding weeks.

Fluctuations in foreign currency assets result from the RBI’s interventions and the variations in the value of foreign assets within the reserves due to appreciation or depreciation.

Foreign exchange reserves encompass India’s reserve tranche position within the International Monetary Fund.

Earlier in the day, as he announced the monetary policy decision, RBI Governor Shaktikanta Das highlighted that India’s foreign exchange reserves are serving as a safeguard against external shocks. “We remain confident of meeting our external financing requirements comfortably,” Das said.

During the week, the rupee maintained a tight trading range of 83.2475 to 83.3950 against the dollar, securing modest weekly gains.

In October 2021, the nation’s foreign exchange reserves achieved a historic peak of USD 645 billion. However, these reserves have been diminishing as the central bank utilises them to safeguard the rupee in response to pressures primarily stemming from global developments.

Generally, the RBI intervenes periodically in the market by managing liquidity, which may involve selling dollars. The aim is to avoid a significant depreciation of the rupee.

The RBI carefully observes the foreign exchange markets, and steps in primarily to uphold organised market conditions, curbing excessive fluctuations in the exchange rate. The intervention is not guided by any predetermined target level or range.

Commerce and Industry Minister Piyush Goyal, at FICCI’s 96th Annual Convention in Delhi, said India’s existing foreign exchange reserves and remittances are substantial. He asserts that these resources are adequate to fortify the currency and sustain economic strength for the next 5-6 years, even considering the prevailing levels of Current Account Deficit and trade deficit.