Weak dollar strengthens India’s forex reserves


A weaker US dollar, a stable rupee and a slow recovery in the inflow of foreign funds added $631.5 million to India’s foreign exchange reserves during the week ended 18 September.

Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities said, “A half-a-billion dollar upswing in the FX reserves can be attributed primarily to the weakness of the greenback against major G-7 currencies. The upswing is also due to some purchases of US dollar in the spot market.”

(Also read: India’s foreign reserves rise to $352 billion, reports RBI)

Over the week ending 18 September, the US dollar weakened between 0.3-0.4 percent against Euro, Pound and Yen.

The Indian reserves consist of nearly 20-25 percent of the non-dollar currencies. The individual movements of these currencies against the dollar impacts the overall reserve value.

Additionally, data with the National Securities Depository Limited showed that the foreign portfolio investors were net buyers in the Indian equities and debt markets.

They invested a total of $341.91 million in both sub-segments of the market during the week under review.

India’s foreign exchange reserves rose by $631.5 million to $352.02 billion in the week ended 18 September.

In the previous week ended 11 September, the reserves had gained $2.35 billion to rise to $351.38 billion. However, the reserves had declined by $2.88 billion in the week ended September 4 to $349.03 billion.

Furthermore, the data furnished by the Reserve Bank of India in its weekly statistical supplement showed that the foreign currency assets had risen by $592.7 million to $328.56 billion in the week under review.

The FCA constitutes the largest component of forex reserves. It consists of US dollars, non-dollar currencies, securities and bonds bought abroad.

The RBI was quoted saying in its statistical supplement, “The FCA expressed in US dollar terms, includes the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve.”

During the week under review, the country’s gold reserves remained stagnant. The country’s gold reserves had depleted by $214.8 million at $18.03 billion during the week ended 4 September.

The special drawing rights in the week under review were higher by $29.3 million at $4.09 billion.

The country’s reserve position with the International Monetary Fund edged up by $9.5 million to $1.32 billion.



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