Key Points

According to the Weekly Statistical Supplement released by the RBI, Foreign currency assets (FCAs) were down by $1.6 billion to $558.86 billion. Expressed in dollar terms, the FCAs include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves saw a surge of $2.8 billion to $77.2 billion.

In the preceding week, that ended on March 14, the country’s forex reserves had risen by $0.305 billion to touch $654.27 billion.

This is the third consecutive week of rise in the kitty, which has been on a declining trend recently due to revaluation, along with forex market interventions by the RBI to help reduce volatilities in the rupee. The forex reserves had increased to an all-time high of $704.885 billion in September 2024.

Any strengthening of the country's foreign exchange kitty also helps bolster the rupee vis-a-vis the rupee which is good for the economy. With the recent increase in foreign exchange reserves the rupee has also emerged stronger.

An increase in foreign exchange reserves reflects the strong fundamentals of the economy and gives the RBI more headroom to stabilise the rupee when it turns volatile.

A strong forex kitty enables the RBI to intervene 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.

Meanwhile, India's merchandise trade deficit has narrowed to an over 3-year low at $14.05 billion in February from $22.99 billion in January as exports held steady during the month while imports declined, according to the latest data compiled by the Ministry of Commerce and Industry.

This reflects a strengthening of the external sector of the economy despite geopolitical tensions triggering economic uncertainty in the world market.

The country's merchandise exports increased by 1.3 per cent to $36.91 billion in February, as compared to $36.43 billion in January, while imports fell by 16.3 per cent to $50.96 billion compared with $59.42 billion in the previous month.

- IANS