Forex Reserves Current Affairs - 2019

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Indian Foreign Exchange Reserves

The RBI data shows that Indian Foreign Exchange Reserves have been increased by USD 1.497 billion to reach USD 398.178 billion for the week to January 25. This increase has been attributed to a jump in core currency assets.

Why the Foreign Exchange Reserves frequently fluctuate?

The Foreign Exchange Reserves are expressed in terms of the US dollars are subject to variations due to the appreciation/depreciation of non-US currencies such as the euro, pound and yen held in the reserves.

Trends in Indian Foreign Exchange Reserves

India’s Foreign Exchange Reserves fluctuations are listed below:

  • In the week previous to January 25, the foreign exchange reserves had dropped by USD 671 million to USD 396.68 billion.
  • The foreign exchange reserves of India had touched a record high of USD 426.028 billion in the week to April 13, 2018. Since then it is mostly declining.
  • The decline is largely attributed to the selling of the dollar by the RBI to contain rupee volatility.
  • The central bank now holds 566.23 tonnes of the gold and purchase of 8.46 metric tonnes of gold was made in the fiscal year ending June 2018.
  • In its annual Report, RBI had stated that the purchase of gold was made to diversify the foreign currency assets.

Foreign Exchange Reserves

Foreign Exchange Reserves are the reserve assets held by a central bank in foreign currencies. They are used to back liabilities on their own issued currency as well as to influence monetary policy. These reserves act as a buffer during the challenging times to the economy.

The components of India’s FOREX Reserves which is expressed in terms of US dollars include foreign currency assets (FCAs), Gold Reserves, Special Drawing Rights (SDRs) and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute the largest component of Indian Forex.

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India’s forex reserves at record high of $424.864 billion: RBI

According to the Reserve Bank of India (RBI), India’s forex (foreign exchange) reserves have touched record high of $424.864 billion in April 2018. The surge was due to massive spike in foreign currency assets (FCAs), a key component of the reserves. The forex reserve had crossed $400-billion mark for the first time in September 2017, but has since been fluctuating.

Forex Reserves

The forex are reserve assets held by a central bank in foreign currencies. It acts as buffer to be used in challenging times and used to back liabilities on their own issued currency as well as to influence monetary policy. Almost all countries in world, regardless of size of their economy, hold significant foreign exchange reserves.

The components of India’s FOREX Reserves include Foreign currency assets (FCAs), Gold Reserves, Special Drawing Rights (SDRs) and RBI’s Reserve position with International Monetary Fund (IMF). FCAs constitute largest component of Indian Forex Reserves and are expressed in US dollar terms.

FOREX Reserves in April 2018

  • Foreign currency assets (FCAs): $399.776 billion.
  • Gold reserves: $21.484 billion.
  • SDRs with IMF: $1.534 billion.
  • Reserve position with the IMF: $2.070 billion.

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