IANS | 22 Mar, 2024
India's foreign exchange reserves surged by $6.4 billion to touch a
robust $642.5 billion for the week ended March 15, the latest data
released by the RBI on Friday showed
.
This is the third
consecutive week marking a big jump in the country’s forex kitty. In the
preceding week that ended on March 8, the foreign exchange reserves had
risen by a whopping $10.47 billion to scale a two-year high of $636.1
billion.
Similarly, during the last week of February, the
country’s foreign exchange reserves had shot up by an impressive $6.55
billion to $625.63 billion.
Rising foreign exchange reserves are a
positive for the economy as they reflect an ample supply of dollars
that help to strengthen the rupee.
An increase in the foreign exchange reserves gives the RBI more headroom to stabilise the rupee when it turns volatile.
This
is because the RBI intervenes in the spot and forward currency markets
by releasing more dollars to prevent the rupee from going into a free
fall.
Conversely, a declining forex kitty leaves the RBI less space to intervene in the market to prop up the rupee.
The
good news on the foreign exchange reserves also comes on the back of
exports touching an 11-month high in February and a decline in the trade
deficit. This indicates a strengthening of the country’s external
balance which augurs well for the rupee going ahead.
