India’s forex kitty goes up, reverses 5-week fall

Mumbai : India’s forex reserves increased by $1.15 billion to $585.895 billion for the week ended October 13, reversing a continuous decline over the preceding five weeks, RBI data released on Friday showed.

This comes as a welcome development as a stronger forex kitty gives the RBI more headroom to support the rupee by releasing more dollars in the market. This comes necessary, especially at a time when oil prices shoot up in the global market and the demand for dollars suddenly goes up to finance crude imports. 

The country’s foreign exchange reserves had fallen by $2.166 billion to a five-month low of $584.74 billion for the week ended October 6, according RBI data released last week. The decline had come on top of a close to $12 billion drop in foreign exchange reserves in the preceding four weeks.

The RBI intervenes in the spot and forwards markets by releasing more dollars to prevent the rupee from going into a free fall when it comes under pressure.

Any sharp decline in the country’s forex kitty limits the scope for the RBI to intervene in the market to stabilise the rupee.