Forex Reserves Rise To $698.27 Billion; Gold Reserves Grow

India's foreign exchange reserves rose to $698.27 billion for the week ended Sept. 5, according to data from the Reserve Bank of India on Friday.

The country's forex kitty rose by $4.038 billion over the previous reporting week. In the previous reporting week, the reserves had risen to $694.23 billion.

The Indian rupee had tumbled to a new record low on Thursday, falling 36 paise to record low of 88.46 against US dollar, in line with the weakness in its Asian peers on the back of buying by importers and banks.

The currency also came under pressure as FIIs offloaded equities worth Rs 3,472 crore on Thursday.

For the week ended Sept. 5, foreign currency assets — a major component of the reserves — declined $0.54 billion to $584.48 billion, according to the RBI data. In dollar terms, foreign currency assets include the effect of the appreciation or depreciation of non-US units like the euro, pound and yen held in foreign exchange reserves.

Gold reserves increased by $3.54 billion to $90.3 billion during the week.

India ranks as the fourth-largest holder of foreign exchange reserves, sufficient to cover nearly a year of imports. The country's forex holdings are the fourth largest, after China, Japan and Switzerland.

India’s finance minister said last week the RBI was taking a “very considered decision” to diversify reserves — which currently stands at about $694 billion dollars, the fourth biggest in the world.  

Foreign holdings of Treasuries hit a record high in June, driven by expectations that the Federal Reserve would cut interest rates and increase capital gains. However, central banks are simultaneously increasing their gold purchases, as they aim to reduce their risk to the US dollar amid global economic uncertainty.