RBI’s forex reserve surges

Foreign exchange reserves showed a stellar $14.7 billion surge in the week ended November 11, according to data released by the RBI. Foreign currency assets rose $11.8 billion, while gold and special drawing rights (SDR) grew by $2.8 billion.

The climb in reserves coincides with a 4 percent decrease in the dollar index, which points to a large valuation change. The RBI holds foreign currency assets in liquid foreign currency securities, bank deposits, and deposits with other central banks. The value of the forex pile changes with the movement in prices of market securities as also exchange rates.

The RBI reports reserves after adjusting for these changes. Every time the dollar falls versus other currencies, including the Indian rupee, the RBI gets the benefit of an increase in the value of its forex pile.