India's foreign exchange reserves witnessed a significant surge, climbing by $6.4 billion to reach a robust figure of $642.5 billion for the week concluding on March 15, as per the latest data unveiled by the RBI on Friday.
This notable increase marks the third consecutive week of substantial growth in the nation's forex reserves. Just the previous week, ending on March 8, saw a remarkable uptick of $10.47 billion, propelling the reserves to a two-year peak of $636.1 billion.
In a similar vein, the final week of February observed an impressive surge, with the country's forex reserves skyrocketing by $6.55 billion to reach $625.63 billion.
The escalating foreign exchange reserves paint a positive picture for the economy, indicating a healthy supply of dollars that serves to fortify the value of the rupee.
The bolstering reserves afford the RBI greater flexibility in stabilizing the rupee amidst volatility. The central bank intervenes in both spot and forward currency markets, infusing additional dollars to prevent a rapid depreciation of the rupee.
Conversely, a dwindling forex reserve diminishes the RBI's ability to intervene effectively, limiting its capacity to support the rupee in the market.
This favorable development in foreign exchange reserves coincides with other positive indicators such as exports reaching an 11-month peak in February and a reduction in the trade deficit. These factors collectively strengthen the country's external balance, boding well for the future stability of the rupee.
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