Foreign exchange reserves increase after falling for four weeks

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The country’s foreign exchange reserves increased by $2.4 billion in the week ended July 29 after declining for four consecutive weeks as foreign portfolio investors returned to Indian markets as net investors.

“India’s foreign exchange reserves were placed at $573.9 billion as of July 29, 2022,” RBI Governor Shaktikanta Das said in his assessment of the monetary policy statement, hours before the announcement. official posting time of 5:00 p.m. Friday.

“The Reserve Bank has used its foreign exchange reserves accumulated over the years to curb exchange rate volatility,” Das said. The latest reserve levels have reversed the depletion trend for four straight weeks. It fell from $593 billion as of June 24 to $571.5 billion as of July 22. Foreign portfolio investors who were seen pulling out of Indian markets as global central banks, particularly in the United States, began to tighten rates as inflation in those economies began to rise.

“On the flow front, we’ve seen net REIT flows turn positive over the past three days,” said Gaura Sengupta, chief economist at . “But the relief could be temporary.”

Many Asian central banks have used foreign exchange reserves to defend their respective currencies. India, Thailand and Korea have seen their reserves plummet by $115 billion this year as they sold dollars to stem currency declines, according to Bloomberg News. “They are simultaneously facing a rapid tightening of external financial conditions, capital outflows, currency depreciations and loss of reserves. Some of them are also facing an increasing burden of debt and defaults,” the governor said in his statement.

Despite the resulting decline, India’s foreign exchange reserves remain the world’s fourth largest. Furthermore, India compares much better than emerging market economies when it comes to external sector strength, RBI said.

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