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India’s forex reserves reach a new peak at $518 billion

25 July 2020


Forex reserved continued to hit record high levels as they rose by $1.275 billion for the week ended July 17 to $517.63 billion, according to the latest data put out by the Reserve Bank of India (RBI).


Foreign currency assets (FCA), which form a key component of reserves, rose by $1.245 billion to $476.88 billion. FCAs are maintained in major currencies like the US dollar, euro, pound sterling and Japanese yen. Any movement in the FCA occurs mainly on account of purchase or sale of foreign exchange by the RBI, income arising out of the deployment of foreign exchange reserves, external aid receipts of the government and revaluation of assets.Gold, another component of the reserves, rose by $13 million to $34.743 billion.Special drawing rights (SDR) from the IMF increased by $2 million to $1.455 billion while reserve position with the IMF increased by $15 million to $4.56 billion.


A BofA Securities report dated July 21 said Indian markets will likely see greater portfolio inflows going ahead as adequate forex reserves cut rupee risks. ‘Finally, Indian corporates should be able to raise money abroad cheaper. On balance, we continue to expect the RBI to continue its asymmetrical forex policy of buying forex when dollar weakens and allowing depreciation if it strengthens. Our BoP estimates place FY21 RBI forex intervention at $45 billion. The RBI will likely be able to sell $50 billion to ward off any speculative attack on the rupee,’ the report said.



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