India’s forex reserves rise by $3.623 bn to hit record high at $538.191 bn

India’s forex reserves continued to hit record high levels as they rose by $3.623 billion as on August 7 compared to the week before to $538.191 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 $1.464 billion to $492.293 billion. FCAs are maintained in major currencies like the US dollar, euro, pound sterling and Japanese yen. 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, which is another component of the reserves, rose by $2.16 billion to $39.785 billion. Special drawing rights (SDR) from the IMF increased by $6 million to $11.099 billion while reserve position in the IMF fell by $7 million to $4.632 billion.

According to a BofA Securities report, adequate reserves should comfort foreign investors into stepping up forex inflows. “The RBI has picked up $6.5 billion in the week ending July 31. Our BoP estimates suggest that it can buy $11 billion more by March 2021. This supports our call that the RBI can sell $50 billion to ward off any speculative attack on the rupee,” the report stated.