New Delhi, Jan 2 Continuing an upward trend, India's foreign exchange reserves increased by $3.293 billion to $696.610 billion in the week ended December 26, according to data released by the Reserve Bank of India (RBI) on Friday.
In the previous week, as reported by the central bank, the country’s foreign exchange reserves had risen by $4.368 billion.
According to RBI data, in the week ended December 26, the value of foreign currency assets (FCAs), the largest component of the reserves, increased by $184 million to $559.612 billion.
Gold reserves registered a sharp rise of $2.956 billion to $113.320 billion. The increase in gold reserves was attributed to a surge in international gold prices during the period.
Meanwhile, the value of Special Drawing Rights (SDRs) increased by $60 million to $18.803 billion. The reserve position with the International Monetary Fund (IMF) also rose by $93 million to $4.875 billion.
A country's foreign exchange reserves are a key indicator of economic health and play a crucial role in maintaining exchange rate stability.
The rise in reserves also reflects the central bank's efforts to manage liquidity and ensure stability in the foreign exchange market. The RBI has stated that it closely monitors developments in the forex market and intervenes when necessary to maintain orderly market conditions.
Such interventions are aimed at reducing excessive volatility in the rupee's movement and are not linked to any fixed exchange rate target.
The latest increase in reserves was also supported by the RBI's USD/INR buy-sell swap auction worth $5 billion, conducted on December 16 to inject liquidity into the banking system.
Under the swap arrangement, banks sold US dollars to the central bank in exchange for rupees and agreed to buy back the same amount of dollars at the end of the swap period. The transaction was settled on December 18, contributing to the overall reserve position.
The steady rise in foreign exchange reserves comes amid strong capital inflows into the country, with India witnessing a notable increase in foreign direct investment commitments during the current financial year.
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