India's foreign exchange reserves rose to $638.26 billion for the week ended Feb. 7, as per the data released by the Reserve Bank of India on Friday.
As per the forex data released by the central bank for the week ended Feb. 7, the country's forex kitty rose by $7.7 billion during the period. This marked the third consecutive week of rise, as the reserves rose by $1.05 billion in the preceding week.
The Monetary Policy Committee has reduced the benchmark lending rate by 25 basis points on Feb. 7., bringing it down to 6.25%. This marks the first time in nearly five years that the rate has been cut. Looking ahead, it is anticipated that food inflation will decrease significantly, assuming there are no unforeseen supply-side disruptions. The Reserve Bank of India has projected an inflation rate of 4.4% for the fourth quarter of the fiscal year 2024-25. If inflation continues to decline, the MPC may have more flexibility to implement further rate cuts to stimulate economic growth.
The consecutive weeks of rise in India's forex reserves come after seven straight weeks of decline. The reserves had plummeted to an 11-month low of $623.98 billion last month.
The Indian rupee strengthened by six paise, closing at 86.83 against the US dollar on Friday. This marks an improvement from Thursday's close of 86.896. The rupee's performance reflects positive market sentiment and potential support from the Reserve Bank of India. At market open on Friday, the domestic currency strengthened by 5 paise against the US dollar, opening at 86.84.
For the week ended Feb. 7, foreign currency assets—a major component of the reserves—rose to $544.106 billion, according to the RBI data. In comparison, it stood at $537.68 billion at the end of the preceding week.
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.
Meanwhile, gold reserves increased to $72.20 billion from $70.89 billion for the week ended Feb. 7, the RBI data showed.
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