India’s foreign exchange (fx) reserves rose $2.98 billion in the first week of the new financial year to an all-time high of $648.562 billion as on April 5, 2024.

Fx reserves in the reporting week were mainly buoyed by increase in gold reserves ($2.398 billion) and foreign currency assets ($549 million).

The other two components of the reserves too rose – Special Drawing Rights (up by $24 million) and Reserve Position in the IMF ($9 million).

According to RBI’s latest monetary policy report, gold prices rallied in Q4 (of CY2023) as financial markets priced in deeper policy rate cuts for 2024 as reflected in lower bond yields and a weaker US dollar.

The hardening of gold prices continued in Q1:2024 to record high in March on growing expectations of interest rate cuts by the US Fed, coupled with demand by central banks and Chinese investors, it added. 

“We have been building reserves depending on the prevailing situation, and that endeavour continues because it acts as a buffer against future risks ....Reserves add to the strength of national balance sheet,” RBI Governor Shaktikanta Das said at last week’s bi-monthly monetary policy press meet.

India’s holds the world’s fourth largest forex reserves after China, Switzerland, and Japan.