India’s Forex Reserves Surpass $700 Billion Once Again, Nearing Record High

 India’s Forex Reserves Surpass $700 Billion Once Again, Nearing Record High




India’s Forex Reserves Cross $700 Billion Mark Again, Approaching Historic Peak

India’s foreign exchange reserves saw a notable increase, rising by $4.84 billion to reach $702.78 billion in the week ending June 27, according to the latest data from the Reserve Bank of India (RBI). This surge places the reserves just shy of the record high of $704.89 billion set in September 2024.

This rebound is significant, especially considering the reserves had fallen to a multi-month low of around $624 billion in late January.

🔹 Foreign Currency Assets Lead the Surge

The key driver behind the rise was a sharp jump in foreign currency assets (FCA), which soared by $5.75 billion to $594.82 billion. In contrast, gold reserves declined by $1.23 billion, totaling $84.5 billion.

Foreign currency assets are expressed in US dollar terms and also reflect changes in the value of non-dollar currencies such as the euro, pound sterling, and yen, which are also part of India’s reserves.

🔹 Other Components Show Modest Gains

India’s Special Drawing Rights (SDRs) rose by $158 million to $18.83 billion, while its reserve position with the International Monetary Fund (IMF) increased by $176 million, reaching $4.62 billion.

🔹 Forward Dollar Book Declines

While the headline numbers appear strong, there was a notable dip in the RBI’s forward dollar book—which reflects future commitments to deliver dollars. The forward book fell by $19 billion over April and May, down to $65.2 billion in May from a record $88.7 billion in February. However, actual net dollar sales during that period were relatively small, at $3.2 billion.

This decline in the forward book slightly offsets the comfort provided by the overall reserve figures, as it represents potential future outflows.

🔹 Rupee Stability and RBI’s Role

The Indian rupee, which has experienced increased volatility since April amid global uncertainties, has been supported by RBI’s strategic interventions. The central bank typically buys dollars when the rupee is strong and sells when it weakens, helping stabilize currency fluctuations and limit depreciation pressure.

🔹 India’s External Strength Remains Solid

In the latest monetary policy briefing, RBI Governor Sanjay Malhotra emphasized that India’s forex reserves are sufficient to cover 11 months of imports and 96% of the country’s external debt, highlighting the country’s robust external position.

A strong forex buffer not only protects against global shocks but also enhances investor confidence and promotes overall economic stability.

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