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Sunday, July 25, 2021

Currency assets propel forex reserves to fresh high of $611 bn

The reserves have been on the rise since more than two weeks ago. In the week ended July 2, they had surged by $1.013 billion to $610.012 billion. In the week ended June 25, they had risen $5.066 billion to $608.999 billion.

By: ENS Economic Bureau | New Delhi |
July 18, 2021 12:42:03 am
FCA rose by $1.297 billion to $568.285 billion during the reporting week. In the preceding week, the FCA had swelled by $748 million to $566.988 billion, as per data by the Reserve Bank of India (RBI) on Friday.

The country’s foreign exchange reserves increased by $1.883 billion to touch a record high of $611.895 billion in the week ended July 9, data released by the RBI showed.

The reserves have been on the rise since more than two weeks ago. In the week ended July 2, they had surged by $1.013 billion to $610.012 billion. In the week ended June 25, they had risen $5.066 billion to $608.999 billion.

During the reporting week ended July 9, the increase in foreign exchange — or forex — reserves was on account of the rise in foreign currency assets (FCA), a major component of the overall reserves, the Reserve Bank of India’s (RBI) weekly data showed.

FCA rose by $1.297 billion to $568.285 billion during the reporting week. In the preceding week, the FCA had swelled by $748 million to $566.988 billion, as per data by the Reserve Bank of India (RBI) on Friday.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves were up by $584 million to $36.956 billion in the reporting week, according to the data. These reserves had climbed by $76 million to $36.372 billion in the week ended July 2.

The special drawing rights (SDRs) with the International Monetary Fund (IMF) inched marginally lower to $1.547 billion.

In the week ago period, the SDRs had increased by $49 million to $1.548 billion.

The country’s reserve position with the IMF increased by $3 million to $5.107 billion in the reporting week, the central bank data showed. In the previous week too, the reserve position with the IMF had increased, gaining $139 million to reach $5.105 billion.

The rising forex reserves could bring some comfort to the government as well as the Reserve Bank in managing the nation’s external and internal financial issues at a time when the economy is facing Covid stress once again and it could have an impact on the gross domestic product growth rate for the ongoing fiscal as states are announcing lockdowns.

It is a big cushion in the event of any crisis on the economic front and enough to cover India’s import bill for a year.

An increase in the forex kitty could also help strengthen the rupee against the American dollar.

Higher reserves could bring confidence to markets that a country can meet its external obligations, demonstrate the backing of domestic currency by external assets, assist the government in meeting its foreign exchange needs and external debt obligations, and maintain a reserve for national disasters or emergencies.

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