Forex kitty hits record $642.5 billion, Rupee at new low

Mar22,2024


Mumbai: India's foreign currency Reserves have reached a new peak, reaching $642.49 billion by March 15, 2024. This milestone was also achieved when Rupee closed at a new low of 83.43 against Dollar – 28 paise less than previous close.
Bankers said there is no irony that reserves are strengthening and the rupee is weakening simultaneously. this is because reserve Bank of India It took a conscious decision this week to absorb $5 billion as part of its foreign exchange management, given that additional dollar inflows are expected in the next fiscal year.
This week, the RBI absorbed $5 billion from dollar/rupee sell-buy swaps that matured on Monday. This sell-buy swap done in March 2022 was a strategic move aimed at reducing pressure on the rupee, which was hit by global events like Russia's invasion of Ukraine, which pushed up crude oil prices. By accepting dollars through sell-buy swaps, the RBI injected liquidity of about Rs 40,000 crore into the currency market. This influx of liquidity facilitated record bond auctions conducted by the RBI on behalf of state governments without impacting yields.

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The March 15 milestone surpasses the previous high of $642.45 billion achieved in September 2021. foreign exchange reserves Reported every Friday. The latest data shows an increase of $6.4 billion compared to the previous week. Foreign exchange reserves consist of three main components, with the majority of foreign currency assets amounting to $568.4 billion. The gold share contributes $51.1 billion, while the special drawing rights with the IMF amount to $18.3 billion. A stronger dollar, driven by favorable risk sentiment and economic optimism in the US, put pressure on the rupee.
“The rupee's decline is mainly due to the rise in the dollar index as the Fed has hinted at future rate cuts. Good balance of payments fundamentals have led to increased forex reserves, which has led to the rise. Also, We also have to recognize that foreign exchange data has lagged.” One week and the revaluation impact will be seen in due course,” said Madan Sabnavis, chief economist at BoB.
The RBI board met in Nagpur on Friday to review global and domestic economic conditions. During the meeting, the board approved the RBI budget for FY 2025.



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