India's foreign exchange reserves have experienced a significant surge, skyrocketing by an impressive $10.47 billion to reach a peak not witnessed in two years, hitting $636.1 billion for the week concluding on March 8, according to the latest data unveiled by the Reserve Bank of India on Friday.
This remarkable ascent marks the largest leap in the nation's forex reserves since the week culminating on July 14, 2023. In the prior reporting period, the overall reserves had already seen a substantial increase of $6.55 billion, reaching $625.63 billion.
The escalation in foreign exchange reserves bodes well for the economy, as it signifies a robust supply of dollars, consequently bolstering the strength of the rupee.
With the surge in foreign exchange reserves, the RBI gains greater flexibility to stabilize the rupee in the face of volatility. The central bank can intervene in the spot and forward currency markets by injecting additional dollars, thereby preventing a free fall of the rupee.
Conversely, a diminishing forex kitty constrains the RBI's ability to intervene effectively to support the rupee in the market.
The positive news regarding foreign exchange reserves coincides with India's exports reaching an 11-month high and a reduction in the trade deficit, further strengthening the nation's external balance. This development bodes favorably for the future trajectory of the rupee.
Read also | Indian Railways Achieves Landmark Revenue of Rs 2.4 Lakh Crore in Fiscal Year 2023-24
Read also | Byju's Ordered by US Court to Freeze $533 Million Debt to Lenders
