MUMBAI: India's foreign exchange reserves shot up by $6.55 billion to $625.63 billion for the week ending March 1, according to the latest data released by the RBI on Friday.
The country’s foreign exchange reserves had increased by $2.98 billion to $619.07 billion in the preceding week ending February 23.
Rising foreign exchange reserves are a positive for the economy, as they reflect an ample supply of dollars that help strengthen the rupee. An increase in foreign exchange reserves helps the RBI stabilise the rupee when it turns volatile.
The RBI intervenes in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall when it comes under pressure.
On the other hand, a sharp decline in the country’s forex kitty leaves the RBI less headroom to intervene in the market to prop up the rupee.