India’s Forex Reserves Surge By $5.17 Bn To Reach $696.6 Bn

India’s foreign exchange reserves surged by $5.17 billion to reach $696.66 billion for the week ending June 6, the Reserve Bank of India (RBI) said on Friday. This sharp weekly increase brings the forex reserves close to their historic peak of $704.885 billion recorded in late September 2024. A stronger forex position supports the rupee against the US dollar and reflects economic resilience.

Foreign currency assets, which form the largest part of the reserves, rose by $3.47 billion to $587.69 billion. These figures include changes in value due to movements in non-dollar currencies such as the euro, pound, and yen.

The RBI reported a $1.6 million increase in the gold reserves, which now stand at $85.89 billion. The central bank has nearly doubled its gold holdings since 2021, amid rising geopolitical uncertainty. Central banks globally are buying more gold to hedge against risks, and India is no exception.

Special Drawing Rights (SDRs) rose by $102 million to $18.67 billion, while India’s reserve position with the International Monetary Fund increased by $14 million to reach $4.4 billion.

In the previous week that ended May 30, India’s forex reserves stood at $691.5 billion. According to RBI Governor Sanjay Malhotra, the current reserves can cover more than 11 months of imports and 96 per cent of the country’s outstanding external debt.

The RBI Governor stated, “India’s external sector remains resilient. Key vulnerability indicators continue to improve. We remain confident of meeting our external financing needs.”

A rising forex reserve reflects sound economic fundamentals and provides the RBI greater flexibility to stabilise the rupee during volatility. The central bank can intervene in both spot and forward currency markets, releasing dollars to prevent sharp depreciation of the rupee.

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