India’s Forex Reserves Surge By $11.9 Billion In A Week
India has seen a huge build-up of foreign exchange reserves in the past few months.
India’s foreign exchange reserves rose to a record high in the last week of the previous month.
Data released by the Reserve Bank of India on Friday showed that forex reserves rose $11.9 billion in the week ended July 31, taking total reserves to $534 billion. India has seen a huge build up of reserves in the last few months as foreign investors pumped in money into Indian equities. One-off inflows from corporate fundraising deals has also helped push up reserves.
In the latest week, however, mark-to-market gains on non-dollar forex holdings may have pushed up reserves. While India holds a majority of its forex reserves in dollars, it also holds a part of this kitty in currencies such as the euro, the Japanese yen and the British pound.
Most of the gain this week is revaluation effect on foreign currency assets and gold revaluation, said Madhavi Arora, lead economist, foreign exchange and rates, at Edelweiss Securities.
Over the week of July 31, the dollar index depreciated over 1% due to falling U.S. bond yields, which is promoting a move into assets denominated in other currencies and hard assets such as gold. Revaluation of gold reserves added $1 billion of the total $11.9 billion in reserves added over the course of the week.
Over the past few months, RBI has chosen to absorb most of the dollar inflows rather than let the rupee appreciate. This has added to domestic liquidity while adding adding to the reserve buffer.