Data for the previous week showed that India’s foreign exchange reserves rose to $572.8 billion, the highest level since early February.
India’s foreign currency assets (FCA), the biggest component of the forex reserves, saw a rise of $4.38 billion to $509.72 billion. India’s gold reserves rose by $1.37 billion to $45.48 billion while SDRs and India’s reserve position in the IMFs saw an increase of $18.41 million and $5.15 million each.
At the start of the last year 2022, the overall forex reserves were at about $633 billion. Much of the decline can be attributed to RBI’s recent intervention and a rise in the cost of imported goods.
Indian rupee firmed against the dollar on Friday on likely fiscal year-end related inflows and strength in local equity markets. The rupee finished at 82.1650 per dollar, compared to its previous close of 82.3375.
The currency halted a five-quarter long losing run with gains of 0.67%, while for the overall financial year it declined 7.8%, its biggest loss since 2020.
Indian equities rallied 1.6% on the last day of the fiscal year, as most Asian shares rose and European stocks opened higher after fears over a wider banking crisis seemed to abate.Depleting forex reserves faced with the high cost of imported goods, and the ongoing monetary policy tightening by the US Federal Reserve triggered the currency’s depreciation. Investors tend to move towards stable markets, such as the US, for better and stable returns amid any tight monetary policy.
Typically, the RBI, from time to time, intervenes in the market through liquidity management, including through the selling of dollars, with a view to preventing a steep depreciation in the rupee.
The central bank intervenes in the spot and forwards market to prevent runaway moves in the rupee’s exchange rate against the dollar. The RBI has said in the past that changes in reserves also stem from valuation gains or losses.