According to the latest RBI data, India’s foreign currency holdings, the largest component of foreign exchange reserves, increased by $4.38 billion to $509.728 billion. Stock Photo | Photo credit: AFP

India’s foreign exchange reserves rose sharply by $5.977 billion to $578.778 billion, hitting a high of more than eight months.

In the previous week ending March 17, they rose by $12.798 billion to $572.801 billion, according to data from the Reserve Bank of India.

According to the latest RBI data, India’s foreign currency holdings, the largest component of foreign exchange reserves, increased by $4.38 billion to $509.728 billion.

Gold reserves over the past week increased by $1.370 billion to $45.480 billion. At the beginning of last year 2022, global foreign exchange reserves stood at around $633 billion. Much of the decline can be attributed to recent RBI intervention and an increase in the cost of imported goods. In October 2021, the country’s foreign exchange reserves hit an all-time high of around $645 billion.

Previously, foreign exchange reserves fell intermittently for months, largely due to the RBI’s intervention in the market to defend the depreciation of the rupee against the rising US dollar. Typically, the RBI intervenes in the market from time to time through liquidity management, including the sale of dollars, to prevent a sharp depreciation of the rupee.

The RBI closely monitors the foreign exchange markets and only intervenes to maintain orderly market conditions by containing excessive exchange rate volatility, without reference to a pre-determined target level or range.