Foreign exchange reserves rise by USD 4.26 billion for week ended March 20

The country's foreign exchange reserves increased by US $4.26 billion to US $339.99 billion for the week ended March 20, data released by the Reserve Bank of India (RBI) showed.

According to analysts, the country's reserves are being build-up by the RBI to absorb any future global financial shocks like the one witnessed in June 2013.

"The RBI is building up the reserves to counter any future financial shocks like the one which was witnessed at the time of the tapering announcements were made. Apart from that the reserves will also act as a support to the Indian rupee," Anindya Banerjee, senior manager, currency derivatives, Kotak Securities told IANS.

The central bank is cautious about the US Federal Reserve's stand that the hike in US interest rates might take place in the later part of 2015.

With higher interest rates in the US, the foreign portfolio investors (FPIs) are expected to be led away from the emerging markets such as India.

The US Fed dropped an assurance to be "patient" in raising interest rates and signalled the hike could come by mid to late 2015.

"Just because we removed the word patient from our statement doesn't mean we will be impatient," Federal Reserve Chair Janet Yellen said at a press conference after a globally-awaited meeting of the policy committee on March 18.

For the previous week ended March 13, the reserves had decreased by US $2.06 billion to US $335.72 billion. For the week ended March 6, the reserves had fallen by US $286.3 million to US $337.79 billion.

The fell in reserves for the previous week (March 13) was attributed to rally in the US dollar and that major non-dollar currencies were trading at their weekly lows. The Indian reserves hold nearly 20-25 percent of the non-dollar currencies.

According to the RBI's weekly statistical supplement, foreign currency assets, the biggest component of the forex reserves grew by US $4.53 billion at US $314.88 billion in the week under review.

The foreign currency assets had declined by US $1.97 billion at US $310.34 billion in the week ended March 13. under review. However, for the week ended March 6, the foreign currency assets had risen by US $122.4 million at US $312.32 billion.

The RBI said the foreign currency assets, expressed in US dollar terms, include the effect of appreciation or depreciation of non-US currencies such as the pound sterling, euro and yen held in reserve.

The country's reserve position with the International Monetary Fund (IMF) in the week ended March 20 decreased by US $295.8 million and stood at US $1.28 billion.

The value of special drawing rights (SDRs) was higher by US $18.2 million in the week under review at US $3.97 billion.

Gold reserves were static at US $19.83 billion. The gold reserves had plunged by US $346.2 million in the week ended March 6.