India’s forex reserves spiked for the first time snapping nine consecutive shrinkages. The forex kitty increased by $4.2 billion to $597.5 billion for the week ended May 20, show latest data from the Reserve Bank of India, which is aiming to retain the $600 billion mark amid current global uncertainties.
“The central bank may have received dollars against its long forwards, which in turn aided the forex reserves to increase,” said Anindya Banerjee, currency analyst at Kotak Securities. There is no reason to believe that RBI has recently bought it from the spot market amid a falling rupee.”
The RBI seems to have obtained a net buy on the dollar-rupee outstanding forwards. Although the comparable data is not available, the latest available data pointed to that. Its outstanding forwards position was at a net of $65.8 billion in the month of March, according to the RBI’s latest monthly bulletin, released on May 17.
During the week, the foreign currency assets fell by 1.3 billion, compared to a drop of 1.3 billion in the preceding week. Similarly, gold reserves showed an uptick of $253 million versus a plunge of $1.17 billion a week earlier.
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.
The rupee Friday was little changed at 77.57 a dollar, according to Bloomberg data. It hit a new all-time low of 77.80 on May 17.
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