MUMBAI: The foreign exchange reserves swelled to a four-month high to top $707 billion for the week to August 7, making it one of the largest additions and the sixth consecutive week of accretion, bolstered by robust dollar inflows under policy measures to strengthen the nation’s balance of payments.
The reserves jumped $14.136 billion to $707.002 billion during the week to August 7, making it the largest rise since January, the Reserve Bank said Friday. The forex pile has been rising over the last six weeks, and the latest addition takes the accretion of about $40 billion. The rise was led by a $9.9 billion weekly gain in the central bank's foreign currency assets, which are the largest component of the reserves and the same was aided by the continuing inflows through the special dollar swap window from NRIs and through OFCBs and ECBs, which as of July had stood at $40.5 billion.
Measures to draw dollar inflows announced from June 8 include discounted hedging facilities for overseas borrowings by state-run firms and banks alongside tax cuts on foreign investments in government bonds and a free-of-cost hedging facility for banks to raise overseas forex deposits.
Between June 8 and July 31, the swap facilities drew flows worth over $40 billion while foreign investors net purchased government bonds worth over $2.5 billion under the so-called fully accessible route.Analysts have said recent central bank interventions to defend the rupee have likely offset the impact of some of the overseas dollar inflows.The overall kitty had jumped by %10.512 billion to $692.866 billion in the previous reporting week ended July 31.
The reserves had expanded to an all-time high of $728.494 billion during the week ended February 27 this year before the onset of the Iran war following which it lead to a massive exchange rate problem and the reserves had fallen to $680 billion or so by May, when the rupee touched a nadir of 96.87 on May 20.
For the week ended August 7, foreign currency assets, a major component of the reserves, rose $9.946 billion to $574.625 billion, the central bank’s data showed. Expressed in dollar terms, the foreign currency assets include effects of appreciation or depreciation of non-US units, such as the euro, pound, and yen, held in foreign exchange reserves.Value of gold reserves rose by $3.995 billion to $108.738 billion during the week, and that of the special drawing rights rose by $79 million at $18.745 billion, the apex bank said, adding the nation’s reserve position with the IMF also rose by $116 million to $4.894 billion.
