India’s Forex Reserves Soar to 20-Month High Amid Market Inflows

Indian Rupee

December 23, 2023

New Delhi, India

India’s Forex Reserves Reach New Heights

In a noteworthy economic development, India’s foreign exchange reserves have surged to a 20-month high, reaching $615.97 billion as of December 15. This marks the fifth consecutive week of growth, with a substantial increase of $9.1 billion reported in the latest week. Let’s delve into the factors contributing to this remarkable uptrend.

Market Inflows Drive Reserves Growth

The increase in foreign exchange reserves is attributed to heavy inflows in both Indian debt and equity markets. December has seen a significant boost, with net inflows totalling $9.2 billion, a substantial rise from the $2.9 billion recorded in November. The Reserve Bank of India’s intervention in forex markets, coupled with valuation changes, plays a pivotal role in influencing these reserves.

Currency Dynamics Amidst Global Factors

While the Indian rupee faced pressure due to escalating crude oil prices and foreign fund outflows, it exhibited resilience within a range of 82.90-83.40 against the dollar during the reported period. The rupee’s biggest weekly gain since August 25 was counterbalanced by its most substantial weekly loss in over two months. The weak dollar index, dropping from 104 to 101.70 in ten sessions, has been a significant support factor for the rupee.

Also Read: USDINR Dynamics: Factors Affecting Rupee’s Course in the Forex Market

Government Responds to IMF Projection

India has rebutted the International Monetary Fund’s projection that the nation’s government debt could exceed 100 percent of its GDP by 2027-28. The finance ministry clarified that the debt situation is not as alarming as projected, citing favorable circumstances that could lead to a decline in the debt-to-GDP ratio to below 70 percent in the same period.

Expert Commentary on Rupee Trends

Jateen Trivedi, VP Research Analyst at LKP Securities, emphasized the role of the weak dollar index in supporting the rupee. Despite facing challenges, the overall trend for the rupee remains sideways, with an exchange rate fluctuating within the 82.90-83.40 zones against the dollar.

In conclusion, India’s foreign exchange reserves’ ascent to a 20-month high is underpinned by robust market inflows, currency dynamics, and the government’s response to economic projections. As the global economic landscape evolves, these factors will continue to shape India’s forex position.

Also check: Rupee vs Dollar

Also Read: Adani Group Secures $6 Billion Global Investments, Boosting Market Confidence

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