Reserves were increased to $544.72 billion thanks to a revaluation and spot market purchases when the currency declined.
Since August 27, 2021, the Reserve Bank of India (RBI) achieved the greatest weekly rise in its foreign currency reserves with a spike of $14.7 billion, making it the highest since the beginning of the year. As of the week that concluded on November 11, the foreign exchange reserves were $544.72 billion.
According to the most recent statistics provided by the RBI, the significant gain in reserves was principally caused by an increase of $11.8 billion in the central bank's total foreign currency holdings, which brought the total to $482.53 billion.
A sharper-than-expected drop in US inflation in the last week encouraged chances of the Federal Reserve slowing down the pace of rate rises, which led to the rupee strengthening by 2% versus the dollar during the past week.
Revaluation in the face of a weaker US dollar and possible purchases of dollars in the spot market by the central bank amid overseas investment flows were cited as the primary reasons by analysts for the large increase in the RBI's reserves. Both of these reasons were cited as the primary reasons for the large increase in the RBI's reserves.
"The revaluation has an effect in certain ways. In other news about the DXY, the dollar index had a decline of 4% during the last week. Additionally, revaluations of currencies other than the dollar may have been a contributing factor. Both the euro and the pound have appreciated by almost 4 percent of their respective values. The yen also contributed 5%, according to the research analyst at HDFC Securities, Dilip Parmar, who spoke with Business Standard.
Aside from that, given to the fact that the RBI has been selling dollars nonstop for a considerable amount of time, it is possible that it has entered the over-the-counter market and purchased some of the additional dollars that were brought in by IPOs in the previous week. "There were floods coming in," he said.
In other data that was published by the RBI on Friday, it was revealed that the country's central bank made a net sale of $10.36 billion dollars in the spot market during the month of September. This compares to a sale of $4.25 billion dollars during the previous month.
The rupee had significant swings in value during the month of September due to the unexpectedly strong direction on policy tightening provided by the Federal Reserve of the United States, which resulted in big gains for the dollar. In September, the rupee lost 2.3% of its value against the dollar, continuing its downward trend after breaking through a series of technically important levels.
The statistics provided by the RBI also revealed that the central bank's outstanding net forward purchases had decreased by $9.7 billion, coming in at a total of $10.42 billion. At the conclusion of the prior fiscal year, the total value of the net forward purchases was $65.79 billion.
"The Reserve Bank of India trades in futures for two main reasons: first, the effect of intervention would be felt less strongly in the spot market, and second, there is an influence on the liquidity of the market. It engages in forward transactions in order to compensate for this," said Bhaskar Panda, executive vice president of international treasury of HDFC Bank.
The Reserve Bank of India (RBI) made net purchases of $1.9 billion and $2 billion respectively in the spot market for the months of April and May, respectively. The sales made by the central bank in June were $3.7 billion, and then in July those sales increased to $19.05 billion. The sales of dollars by the Reserve Bank of India (RBI), which are done in an effort to curb excessive volatility in the rupee, have the unintended consequence of reducing the amount of liquid assets available in the banking sector.
As of February 25, when Russia began its invasion of Ukraine, the Reserve Bank of India (RBI) had a total of $631.53 billion in its reserves.
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