Foreign fund inflows and weakening US dollar have led to a rise in India’s foreign exchange reserves that touched a record high of $426.42 billion in the week ended June 21.
Data released by the Reserve Bank of India (RBI) showed the country’s foreign exchange reserves grew by $4.22 billion from $422.20 billion in the previous week. The reserves had last touched record of $426.08 billion on April 13, 2018.
“Capital reserves in the last quarter have significantly risen, supporting the build-up in forex reserves. This also reflects that the central bank mopped up excess inflows,” said Shubhada Rao, Chief Economist, YES Bank.
So far, there have been foreign fund inflows worth $11.42 billion in equities and $1.53 billion in India’s debt markets, since the start of 2019.
The foreign currency assets that also reflect changes in valuation, increased by $4.2 billion to $398.65 billion in the week ended June 21.
“Foreign investments will keep flowing into emerging markets as major central banks like the US Fed and European Central Bank have signalled lower interest rates going ahead. India will also benefit from it,” said Madan Sabnavis, Chief Economist at CARE Ratings.
Earlier this week, US President Donald Trump said he wants a weaker dollar to help boost exports after comments from ECB led to a fall in the Euro against the dollar. The dollar index, which measures the value of the greenback against a basket of six world currencies, fell by 2 percent in the past month.
The rupee ended higher at 69.03 against the dollar for the fifth consecutive session on June 28. It touched a high of 68.8 against the greenback in intraday trade. So far, the Indian currency has appreciated by 1 percent against the dollar.
Source: moneycontrol.com