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India's foreign exchange reserves (forex) dipped USD 4.888 billion to USD 685.729 billion in the week ending May 16, official data released by the Reserve Bank of India (RBI) showed.

Estimates suggest that India's foreign exchange reserves sufficiently cover approximately 10-12 months of projected imports.

Even with this weekly loss, the forex kitty is quite close to its all-time high of USD 704.89 billion, reached in September 2024.

Recently, forex reserves extended gains for the eighth straight week, helping them inch closer to their previous peak after a consistent slump for about four months.

The latest RBI data showed that India's foreign currency assets (FCA), the largest component of foreign exchange reserves, stood at USD 581.652 billion.

The gold reserves currently amount to USD 81.217 billion, according to RBI data. It fell by a whopping USD 5.121 billion in the latest week. Central banks worldwide are increasingly accumulating safe-haven gold in their foreign exchange reserves kitty, and India is no exception. The share of gold maintained by the Reserve Bank of India (RBI) in its foreign exchange reserves has almost doubled since 2021.

In 2023, India added around USD 58 billion to its foreign exchange reserves, contrasting with a cumulative decline of USD 71 billion in 2022.

In 2024, the reserves rose by a little over USD 20 billion.

Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling.

The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The RBI strategically buys dollars when the Rupee is strong and sells when it weakens.

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