RBI data show gold reserves and foreign currency assets rose during the week, aided by a $5 billion USD/INR buy-sell swap and intervention in the rupee market
The rupee appreciated sharply during the last trading hour on December 19 likely on the back of aggressive intervention by the RBI via dollar sales
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India’s foreign exchange reserves rose by $4.37 billion to $693 billion in the week ended December 19, driven by an increase in gold reserves and foreign currency assets, latest data from the Reserve Bank of India (RBI) showed.
The rise in foreign currency assets is attributed to the RBI’s USD/INR buy-sell swap auction of $5 billion conducted on December 16, with the transaction settled on December 18.
According to the data, gold reserves increased by $2.6 billion during the reported week, while foreign currency assets rose by $1.6 billion to $559 billion. India’s forex reserves had hit a record high of $705 billion in September 2024.
“While the RBI sold dollars heavily during the week, the swap auction infused $5 billion; hence, the net amount is positive,” said a forex dealer at a state-owned bank.
Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP, said foreign exchange reserves increased by $4.368 billion as of December 19, a week in which the RBI sold heavily to bring the dollar down from 91.08 to 89.27. The RBI must have bought heavily also at 89 as assets grew by $1.641 billion during that week while gold reserves rose by $2.623 billion.”
During the reported week, the rupee experienced high volatility, hitting fresh lows for four consecutive sessions. It eventually settled about 1.3 per cent stronger against the dollar, oscillating between 91.08 and 89.25 per dollar amid choppy trade. After recognising the scale of long speculative positions in the market, the central bank decided to intervene more aggressively, pushing the spot rate lower.
The rupee appreciated sharply during the final trading hour on December 19, likely due to aggressive dollar sales by the RBI. The central bank is estimated to have sold around $3 billion-$4 billion on that day.
Meanwhile, the RBI has infused ₹1.45 trillion of durable liquidity so far in December through open market operation (OMO) purchases and forex buy-sell swaps.
Special drawing rights (SDRs) rose by $8 million to $18.74 billion, while India’s reserve position with the International Monetary Fund (IMF) increased by $95 million to $4.78 billion during the reporting week.
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