The Reserve Bank of India’s foreign exchange reserves rose $11.02 billion to $561.16 billion in the week ended December 2, marking their highest levels since August 26.
The sharp increase in the foreign exchange reserves was primarily on account of a jump in the RBI’s foreign currency assets, which climbed $9.7 billion to $496.98 billion in the previous week, latest data showed.
The data marks the fourth consecutive week in which the RBI’s reserves have risen. As on November 4, the reserves were at $530 billion. The large increase in reserves comes amid a steep decline in the dollar index.
The dollar index weakened around 6 per cent in November as data showing a larger-than-expected decline in US inflation led to expectation of the Federal Reserve slowing down the pace of its monetary tightening.
In the week ended December 2, the rupee gained 0.45 per cent against the dollar ending the week at 81.32 per dollar. So far in 2022, the domestic currency has depreciated 9.6 per cent against the greenback.
With the decline in the dollar index leading to strength in emerging market currencies like the rupee, the RBI had likely started replenishing its foreign exchange reserves, analysts said.
“I think apart from revaluation, RBI might have bought the dollar because we see that in the previous week the dollar index has fallen. The RBI has likely accumulated some reserves. Apart from that, non-dollar assets have also appreciated. So, these are the two main things which have resulted in addition to forex reserves,” HDFC Securities research analyst Dilip Parmar said.
RBI’s reserves have declined sharply so far this year, partly due to dollar sales by the central bank as it sought to protect the rupee amid global headwinds.
The RBI’s reserves stood at $631.53 billion as on February 25, which was around the time Russia invaded Ukraine, sparking a global flight of investment to the safety of the dollar.
Reserves worth $530 billion as on November 4 covered 8.6 months of imports projected for the current financial year, the RBI said last month.
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