India’s foreign exchange reserves hit a record high last week, even as the central bank stepped in to protect the rupee as it fell following the surprise election result.
Data released by the Reserve Bank of India on Friday showed inventories rose by $4.3 billion to $655.8 billion as of June 7. Indian markets were in turmoil in the first week of June after polls showed Prime Minister Narendra Modi’s Bharatiya Janata Party lost its majority in parliament and would have to rely on allies to form a government.
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The rupee, along with other emerging market currencies, has fallen this week after the U.S. Federal Reserve signaled it would slow the pace of interest rate cuts due to persistently high inflation. The local currency closed at 83.5612 to the dollar on Friday.
Foreign exchange reserves are expected to rise further after India is included in JPMorgan Chase’s emerging market bond index later this month.
The burgeoning foreign exchange reserves give the Reserve Bank of India ample ammunition to defend the rupee amid global volatility, with the central bank stepping in to ensure the stability of the local currency, Bloomberg reported earlier.
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