FOREX Reserves Surge to Record Highs, Boosting Economic Outlook

As per the data supplement published by the Reserve Bank of India (RBI) on Friday, India’s foreign exchange reserves have increased for two consecutive weeks and have now touched $586.41 billion, a level that hasn’t been seen in over nine months. The reserves have shown a growth of $1.65 billion from the previous week, with the overall reserves growing by $6.306 billion to $584.755 billion from the previous reporting week. After four weeks of continuous growth, the reserves have reached their highest point since July 2022.

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The RBI’s Weekly Statistical Supplement showed that foreign currency assets, a significant portion of India’s FOREX reserves, rose by $2.204 billion to $516.635 billion as of April 14. This includes the value of non-US currencies held in the reserves, determined in dollar terms. Additionally, India’s reserve position with the IMF increased by $12 million to $5.19 billion during the same period.

According to Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, India’s forex reserves increased for the second consecutive week by $1.657 billion to reach $586.412 billion from $584.76 billion on April 14, 2023. The rise in reserves is attributed to RBI’s intervention in the FOREX markets to ensure stability in the domestic currency, and it has resulted in the highest levels of FOREX reserves in nine months.

The gold reserves decreased by $521 million to $46.125 billion as per RBI. On the other hand, the Special Drawing Rights (SDRs) decreased by $38 million to $18.412 billion. During the reporting week ending on April 21, the rupee traded within a range of 81.77 to 82.15 against the dollar, ending the week slightly higher. However, the rupee’s four-week upward trend came to an end on Friday as it closed at 82.09.

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The upcoming 4QFY23 earnings season will gain momentum in the coming weeks, while there are mixed signals from the US, Europe, and China’s economic data. Inflation remains high in the US and Europe, although it is declining, and there are initial signs of a recession in the US jobs data and the management commentary of TCS and Infosys. In India, inflation has eased, and growth is steadily increasing due to government CAPEX and PLI investments, with strong service exports offsetting the slowdown in merchandise exports and boosting FOREX reserves. Investors will focus on the March quarter earnings outcome and management commentary for further cues, according to Mitul Shah, Head of Research at Reliance Securities.

On Friday, the rupee recorded its second consecutive session gain by rising 8 paise to settle at 82.09 (provisional) against the US dollar. Starting off well at 82.11 against the dollar, the rupee reached an intra-day-high of 82.07 and a day-low of 82.19 before ultimately gaining 8 paise over the previous close. It finished the day at 82.09 against the US dollar. Furthermore, the dollar index gauges the dollar’s strength against a basket of six different currencies. It increased by 0.05% to 101.89.