The uptick in the foreign exchange reserves is a result of the rise in the Foreign Currency Assets (FCA), which is a major component of the overall reserves.
India’s foreign exchange reserves rose for the second consecutive week due to easing pressure on the rupee due to a fall in crude oil prices and less hawkish US Federal Reserve.
During the week ending November 18, the forex reserve rose $2.54 billion to $547.25 billion, according to the Weekly Statistical Supplement released by the Reserve Bank of India (RBI).
The uptick in the foreign exchange reserves is a result of the rise in the Foreign Currency Assets (FCA), which is a major component of the overall reserves. The FCA rose $1.76 billion to $484.29 billion for the week ending November 18.
Meanwhile, gold reserves rose $315 million to $40.01 billion.
In the week ending November 11, foreign exchange reserves showed a stellar $14.7 billion surge too. This sudden surge in India’s forex reserves after a consistent fall in the past five months has caught the attention of the market.
The central bank has been digging into its reserves for the past few months to protect the rupee from depreciating sharply due to global cues.
On November 25, the rupee rose against the US dollar on dollar weakness and improved risk sentiments. At the foreign exchange market, the rupee ended at 81.68 against the US dollar.
“The rupee rose today after staying in a range of 81.65 to 81.90 in the last five days as the dollar index was stable at 105.84; Asian currencies fell from yesterday’s highs and Brent Oil rose by a dollar to $ 86.06 levels. At the higher level of the rupee, i.e. 81.43, there was some good dollar buying as cash dollar shortage continues to hamper the rise in rupee,” said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors LLP.
“Rupee in the week traded flat in range bound sessions as dollar vs rupee traded in the range of 81.40-81.85 with weekly closing in base range. Thanksgiving holidays and lack of important data kept prices neutral. The rupee saw heavy weakness against the euro and the GBP as the Fed’s meeting minutes updates showed less intent towards higher hikes ahead,” said Jateen Trivedi, VP Research Analyst at LKP Securities.