India’s foreign exchange reserves have experienced consistent growth for the third consecutive week, reaching a notable milestone of $599.53 billion for the week ending May 12, according to the Reserve Bank of India (RBI)’s statistical supplement. This marks the highest level of reserves since early June, showcasing an increase of $3.55 billion from the previous week. Reuters reports that over the past two weeks, reserves have grown by a substantial $11.7 billion.
The central bank, RBI, frequently intervenes in the spot and forwards markets to prevent excessive fluctuations in the Indian rupee. These interventions, coupled with gains or losses in currency value, significantly impact the changes in foreign exchange reserves. Despite the RBI’s ongoing efforts to bolster reserves, some treasury officials and analysts cited by Reuters earlier this week expressed concerns that this intervention may test the optimistic outlook on the rupee held by numerous international banks. The rupee faced a 0.4% decline during the week covered by the foreign exchange reserves data due to the strengthening of the dollar index. Throughout the week, the local currency traded between 81.6900 and 82.2250 against the dollar.
However, in the current week, the rupee experienced its sharpest drop in two months, declining by an additional 0.6%. As of Friday, the rupee was valued at 82.66 against the dollar. Continuing its upward trajectory, India’s foreign exchange reserves grew by $7.196 billion, inching closer to the $600 billion threshold, in the week ending May 5, 2023. This marks the second consecutive week of reserve growth. Apart from Special Drawing Rights (SDRs), all other indicators witnessed advancements during the review week, with foreign currency assets (FCA) serving as the primary driver. In conclusion, India’s foreign exchange reserves have surged past the $600 billion mark, driven by consistent growth over recent weeks and ongoing intervention by the RBI.