Surge in forex reserves gives the RBI more headroom to stabilize the rupee when it turns volatile
According to the latest data released by the Reserve Bank of India (RBI), India’s foreign exchange reserves surged by $6.4 billion to touch a robust $642.5 billion for the week ended March 15.
This is the third consecutive week marking a big jump in the country’s forex kitty.
The positive news on the foreign exchange reserves also comes on the back of exports touching an 11-month high in February and a decline in the trade deficit. This indicates a strengthening of the country’s external balance which augurs well for the rupee going ahead.
India’s rising forex reserves are positive for the economy as they reflect an ample supply of dollars that help to strengthen the rupee.
The surge in forex reserves gives the RBI more headroom to stabilize the rupee when it turns volatile. This is because the RBI intervenes in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall.
During the week that ended on March 8, the foreign exchange reserves had risen by a whopping $10.47 billion to scale a two-year high of $636.1 billion.
Similarly, during the last week of February, the country’s foreign exchange reserves had shot up by an impressive $6.55 billion to $625.63 billion.
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