India’s forex reserves surge for 3rd week in row to touch $642.5 billion mark

India's foreign exchange reserves surged by $6.4 billion to touch a robust $642.5 billion for the week ended March 15, the latest data released by the RBI on Friday showed.

This is the third consecutive week marking a big jump in the country’s forex kitty. In the preceding week that ended on March 8, the foreign exchange reserves had risen by a whopping $10.47 billion to scale a two-year high of $636.1 billion.

Similarly, during the last week of February, the country’s foreign exchange reserves had shot up by an impressive $6.55 billion to $625.63 billion.

Rising foreign exchange reserves are a positive for the economy as they reflect an ample supply of dollars that help to strengthen the rupee.

An increase in the foreign exchange reserves gives the RBI more headroom to stabilise the rupee when it turns volatile.

This is because the RBI intervenes in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall.

Conversely, a declining forex kitty leaves the RBI less space to intervene in the market to prop up the rupee.

The good news on the foreign exchange reserves also comes on the back of exports touching an 11-month high in February and a decline in the trade deficit. This indicates a strengthening of the country’s external balance which augurs well for the rupee going ahead.