A $3.6 billion increase in foreign currency assets aided the expansion of the total stock of reserves, billed as a cushion against global economic headwinds.
Forex reserves were $601.4 billion for the week ended May 27 versus $597.5 billion in the preceding week, show data from the Reserve Bank of India, released Friday evening. The portion of reserves parked in gold and other International Monetary Fund-backed assets rose by about $244 million.
“The expansion of forex reserves could be due to revaluation only as there was no known overseas inflows into the country,” said Madan Sabnavis, chief economist at Bank of Baroda.
“In the particular week, the dollar index dropped against other major world currencies including the euro and pound,” he said. “This in turn resulted in an increase in the value of those cross currencies on which India holds a fair share of foreign assets.”
The exact share of dollar-denominated assets or other currency assets in RBI‘s forex kitty is not known. However, it is estimated that more than one-third would be in non-dollar assets.
For the week ended May 27, the dollar index, which measures the unit against a pack of major currencies, fell nearly by 1.5% to 101.67.
Back home, the rupee was a tad lower at 77.63 against the dollar Friday, according to Bloomberg data.
India’s central bank would seek to keep its stash of foreign exchange in excess of $600 billion to provide adequate cushion through the current commodities super-cycle, record inflation in the West and the Ukraine war, potentially halting sell-buy currency swap deals hitherto used to suck out excess rupee liquidity, ET reported on May 7.
Forex reserves had increased also in the week ended May 20, snapping nine consecutive weeks of shrinkages.
The RBI was said to have obtained a net buy on the dollar-rupee outstanding forwards, which triggered the increase in reserves in the week ended May 20.