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India's Forex Reserves Rise to Two-Month High of $682.3 Billion on Strong Inflows
India's foreign exchange reserves climbed to a two-month high of $682.3 billion for the week ending July 24, according to data released Friday. The increase marks the fourth consecutive week of growth, providing the central bank with greater capacity to manage currency volatility.
Details of the Increase
The country's reserves saw a significant weekly jump of $6.1 billion, bringing the total increase over the past four weeks to approximately $16 billion. The latest rise was driven by gains in both foreign currency assets and gold holdings.
- Foreign Currency Assets (FCA): This largest component of the reserves grew by $4.9 billion.
- Gold Holdings: The value of gold reserves increased by $1.3 billion, reaching a total of $103 billion.
The FCA figure also reflects valuation changes due to the appreciation or depreciation of non-dollar currencies, such as the euro and yen, held in the reserves.
AdDriving Factors and Context
The recent surge in reserves is largely attributed to strong dollar inflows from a foreign-currency deposit program initiated by the Reserve Bank of India (RBI) to strengthen the country's balance of payments. In a media interview earlier this week, RBI Governor Sanjay Malhotra stated the measures attracted approximately $40 billion between June 8 and July 26.
These bolstered reserves provide the RBI with more firepower for potential market interventions. The central bank has been actively selling dollars to support the Indian rupee, which has depreciated by 5% since the start of the U.S.-Iran war, as cited by the source. The accumulation of reserves helps offset pressures from rising energy prices and capital outflows, which have moderated following recent policy actions.
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