Forex reserves at near 7-month high of $577 bn on spike in currency assets

Following a decline of $100 billion in its reserves from February to September of 2022, the RBI has over the last three months been replenishing its holding

The Reserve Bank of India’s foreign exchange reserves rose $3 billion to $576.76 billion in the week ended January 27, latest data released by the central bank showed.

The current level of reserves is the highest since the week ended July 8, 2022.

The rise in the reserves in the previous week was primarily on account of an increase in the RBI’s foreign currency assets which climbed $2.7 billion to $509.02 billion, the data showed.

“The revaluation of dollar assets and expected dollar buying from the central bank pushed the forex kitty to the level last seen in July 2022,” Dilip Parmar, research analyst at HDFC Securities said.

In the previous week, the rupee weakened 0.5 per cent against the dollar, closing at 81.52 per dollar on January 27. So far in 2023, the rupee has gained one per cent against the US currency.

Following a decline of $100 billion in its reserves from February to September of 2022, the RBI has over the last three months been replenishing its foreign exchange reserves.

From June to October of 2022, the RBI was a net seller of US dollars in the currency market as the central bank sought to rein in excessive volatility in the rupee’s exchange rate amid the Ukraine war and aggressive rate hikes by the Federal Reserve

Foreign exchange reserves rose by $28.9 billion since September-end and stood at $561.6 billion as on January 6, 2023, covering more than nine months of imports projected for 2022-23, RBI staff said in January. In November 2022, the central bank net bought dollars for the first time since May 2022.