Forex reserves of India have jumped by $4.038 billion to $698.268 billion during the week ended September 5, PTI reported. This came on the back of a sizeable
increase in value of gold reserves, the RBI data said. In the previous reporting week, the overall reserves had jumped by $3.51 billion to $694.23 billion. For the week ended September 5, foreign currency assets, a major component of the reserves, increased by $540 million to $584.477 billion, the data showed. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. The gold reserves increased by $3.53 billion to $90.299 billion during the week, the data said. The Special Drawing Rights (SDRs) were down by $34 million to $18.742 billion, the apex bank said. India's reserve position with the IMF was up by $2 million at $4.751 billion in the reporting week, the Reserve Bank data showed.
Why foreign exchange reserves are important?
Stronger foreign currency reserves enable central banks in developing markets to stabilize their currencies during volatile periods by providing dollars to the market. The government is in a strong position when forex reserves are rising, and the RBI is effectively managing India’s external and internal financial challenges.It helps the government meet its foreign exchange requirements and fulfill external debt obligations.
Moreover, strong foreign exchange reserves helps the Indian rupee to strengthen against the US dollar. It also serves as a cushion in the event of a Balance of Payment crisis on the economic front. Strong foreign exchange reserves also boosts the confidence in the market and investors that a country can meet its external obligations. (With PTI Inputs)
