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India’s foreign exchange (FX) saw one of the highest single weekly accretions at $12.743 billion in recent times in the week ended July 14th, to once again vault over the $600 billion mark.
The FX reserves stood at $609.022 billion as on July 14, 2023, per RBI’s weekly statistical supplement.
The last time that the reserves were above the $600 billion mark was in the week ended May 27, 2022 and June 3, 2022, when they stood at $601.363 billion and $601.057 billion, respectively.
India’s reserves had touched an all time high of $642.019 billion in the week ended October 3, 2021.
Soaring FCA
In the reporting week, the reserves were up mainly on the back of the Foreign Currency Assets (FCA) soaring by $11.198 billion.
The other three components of the reserves too increased -- Gold (up by $1.137 billion), Special Drawing Rights ($250 million) and Reserve Position in the International Monetary Fund ($158 million).
“So far, the RBI seems to have capped any significant INR gains to rebuild its FX reserve buffer to provide insurance against a potential global spillover.
“We think comfort from this buffer could give the RBI some leeway to allow some gains in USDINR later in the year (UBS estimate: 79 at year end-FY24),” said Tanvee Gupta Jain, Economist; Rohit Arora, Strategist; Nihal Kumar Associate Economist, UBS, in a report.
India’s external vulnerability has improved on a narrowing CAD (current account deficit) and modest short-term external debt, per the report.
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