Forex reserves rise by USD 14 bn to USD 700 bn: RBI data

India’s foreign exchange reserves surged by USD 14.167 billion , reaching USD 701.36 billion in the week ended January 16 , according to data released by the Reserve Bank of India (RBI) on Friday. This jump comes after a modest rise of USD 392 million in the previous week, when reserves stood at USD 687.193 billion . The latest increase marks a strong recovery in the country’s currency buffers, which had come under pressure in recent months due to interventions aimed at stabilising the rupee .

It may seem contradictory that forex reserves are rising while the rupee weakens , but this can happen due to two main reasons. First, net inflows into the country, such as foreign investments, export earnings, or remittances, bring fresh dollars into India and add to the forex reserves. Second, the RBI may be buying dollars to prevent sharp rupee volatility. These purchases directly increase foreign currency assets in the reserves. However, such interventions do not always lead to rupee appreciation, especially if global dollar demand remains strong or oil prices rise, keeping the rupee under pressure.

The main component of the reserves, foreign currency assets , climbed by USD 9.652 billion to USD 560.518 billion . These assets are influenced not only by dollar holdings but also by the valuation of other currencies such as the euro, pound and yen , which are part of the RBI’s reserve portfolio. Meanwhile, the value of gold reserves surged by USD 4.623 billion , taking the total gold reserves to USD 117.454 billion .

However, not all components saw gains. The Special Drawing Rights (SDRs) dipped slightly by USD 35 million , settling at USD 18.704 billion . Similarly, India’s reserve position with the IMF declined by USD 73 million , taking it to USD 4.684 billion .

India’s forex reserves had touched an all-time high of USD 704.89 billion in September 2024. Since then, the reserves have been under pressure, largely because the RBI has been using its reserves to smooth out volatility in the rupee, especially during periods of sharp currency movements. With the latest rise, the country’s forex reserves have crossed the USD 700 billion mark, a significant milestone that reflects strong external stability, adequate buffer against global uncertainties, and healthy import cover.