India's forex reserves grow by $1.36bn

India News Bulletin Desk

India's foreign exchange reserves (forex) grew by $1.36bn (£878m) to $289.39bn (£187bn) for the week ended June 15, according to RBI’s weekly statistical report.

Foreign currency assets, one of the biggest contributors to the forex reserves fund, grew by $1.17bn to $256.95bn for the same week, the report further showed.  

The central bank, explained that the foreign currency assets expressed in US dollar terms include the effect of appreciation/depreciation of non-US currencies (such as Sterling Pound, Euro and Yen) held in its reserves.

The gold reserves also grew $175m to $1.45bn for the same period.

The RBI did not provide any other reasons for the rise in the foreign currency assets.

The rise in forex reserves comes after the reserves dropped $2.4bn for the week ended June 1, amid RBI’s strategy of selling dollars to curb the value of a sliding rupee.

A country's foreign exchange reserves allow its central bank (RBI in India's case) to purchase the domestic currency, which is considered as a liability for the central bank (because it prints the money as IOUs). This purchase action can help the country stabilize the value of the domestic currency if it becomes too volatile or continues to slide downwards.

Large reserves of foreign currency can allow a country's government to manipulate exchange rates in order to stabilize the foreign exchange rates and generate a more favorable economic environment. 

India is also planning to use its foreign exchange reserves to create its own investment firm.

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