New Delhi, Oct 25: Amid persistent foreign institutional investors (FII) selling and growing geopolitical tensions, India’s foreign exchange (forex) reserves saw a $2.163 billion drop to stand at $688.267 billion in the week ended October 18, data from the Reserve Bank of India (RBI) showed on Friday.
Meanwhile, gold reserves increased by $1.786 billion to $67.444 billion during the week, according to the central bank. There has been a surge in gold buying amid geo-political tensions. According to industry experts, gold is now acting as a hedge against US economic sanctions too, traditionally being a safe haven asset (store of value) and as a hedge against inflation.
Despite inflation being moderated, gold has rallied to new highs. The share of gold in the country’s forex has also surged more than 210 per cent since 2018. Last week, the forex saw $10.746 billion drop to $690.43 billion (for the week ended October 11).
The forex had hit an all-time high of $704.885 billion at the end of September. For the week ended October 18, the Special Drawing Rights (SDRs) were down by $68 million to $18.271 billion. The country’s reserve position with the International Monetary Fund (IMF) was down by $16 million to $4.316 billion.
Looking ahead, India’s forex reserves are projected to grow and the strong forex will boost its economic growth trajectory by strengthening its position internationally, drawing in foreign investments, and promoting domestic trade and industry.
The changes in foreign currency assets result from the central bank’s actions in the forex market and fluctuations in the value of foreign assets within the reserves. According to experts, the bullion is likely to close this week in positive, amid support from safe demand, ETF buying, uncertain US election outcome, and rising bets for aggressive rate cuts from global central banks.
IANS