Foreign currency assets Current Affairs - 2020

Foreign Exchange reserve touches a new high of 451.08 billion USD

According to the weekly data released by the Reserve Bank of India, the foreign exchange reserve touched a new high of 451.08 billion USD. The foreign exchange currency assets include the depreciation or appreciation of the non-US currency like pound, Euro and Yen as well.

Highlights

The increase is mainly due to the rise in foreign currency assets. The Gold reserves of India also declined by 148 million USD. At present India holds 26.910 billion USD of gold. The reserve position of the country with IMF (International Monetary Fund) also decreased, and came down by 6 million USD. The special drawing rights with the IMF were down by 4 million USD.

Gold reserves and Foreign Exchange

The value of a currency is highly important for the foreign exchange to reach new heights. If the value of the currency is high, the foreign exchanges are good.

The value of the currency is determined by its imports and exports. The exports should be more (or imports become expensive) for the currency value to rise in the international market. If the country is buying more gold (as reserve), it means it is importing more. On the other hand, when the gold reserve is declining, exports are more.

Therefore, if the gold reserve is declining, value of the currency increases and therefore foreign exchange increases

India’s forex reserves at new life-time high of $430.57 bn

According to latest Reserve Bank of India (RBI) data, India’s foreign exchange (forex) reserves surged to new life-time high of US $430.572 billion in week to August 9, 2019. It was on account of rise in foreign currency assets, the major component of the overall reserves. In the previous reporting week ended on August 2, 2019 forex reserves had declined by US $697.2 million to US $428.952 billion.

Various components of Forex reserves (in reporting week)

Foreign currency assets (FCA): It increased by US $15.2 million to US $398.739 billion.

It is expressed in dollar terms and includes effect of depreciation/appreciation of non-US currency units (US Dollar) like euro, pound and yen held in reserves.

Gold reserves: It surged by US $1.591 billion to US $26.754 billion.

Special drawing rights (SDR) with the International Monetary Fund (IMF): Increased US $6.7 million to US $1.441 billion.

Reserve position with IMF: It rose by US $7 million to US $3.636 billion.