India’s Foreign Exchange Reserves Soar to All-Time High of $740 Billion; Are RBI’s Swap Initiatives Boosting Fund Inflow

India's forex reserves jumped USD 11.475 billion to a new all-time high of USD 740.803 billion during the week ended August 28, the RBI said on Friday. In the previous reporting week, the kitty increased by USD 12.422 billion to USD 729.328 billion, a record high. The previous all-time high of USD 728.494 billion was attained during the week ended February 27 this year, right before the onset of the Middle East conflict.

What's caused Foreign Fund Inflow 

The geopolitical tensions led to several weeks of a drop as the rupee and the RBI had to intervene in the forex market through dollar sales.

The reserves have been increasing since the RBI announced the concessional forex swap initiatives in June this year amid a sharp depreciation in the local currency. The move has yielded over USD 132 billion in new flows.

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For the week ended August 28, foreign currency assets, a major component of the reserves, increased by USD 9.337 billion to USD 600.67 billion, the central bank's data showed.

Expressed in dollar terms, foreign currency assets include the effects of appreciation or depreciation of non-US units, such as the euro, pound, and yen, held in the foreign exchange reserves.

Gold Reserves Surge

The value of gold reserves increased by USD 2.191 billion to USD 116.409 billion during the week, the RBI said. The special drawing rights (SDRs) were down USD 43 million to USD 18.81 billion, the apex bank said.

India's reserve position with the IMF was also down by USD 11 million to USD 4.914 billion at the end of the reporting week, according to the apex bank's data.

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Rupee Closes Flat 

The rupee settled for the day higher by 2 paise at 94.49 (provisional) against the US dollar on Friday, supported by optimism over rising foreign inflows and a rise in risk appetite. Forex traders said the rupee is set to strengthen due to robust foreign capital inflows and active RBI intervention.

However, rising crude oil prices and escalating US-Iran geopolitical tensions may cap these upside gains.

Disclaimer: This story has been published from an agency feed (PTI) with few changes in subheads and headline.