India’s latest foreign exchange reserve numbers show an unexpected trend: while foreign currency assets have declined, the Reserve Bank of India’s (RBI) substantial gold purchases have helped lift overall reserves. Without the increase in gold holdings, the forex data would have looked significantly weaker. Notably, this rise comes after two consecutive weeks of sharp declines in India’s reserves.

Forex Reserves Record an Increase
According to RBI data released on Friday, India’s foreign exchange reserves climbed by USD 1.033 billion to USD 687.26 billion for the week ending December 5. This is a recovery from the previous week, when reserves dropped by USD 1.877 billion to USD 686.227 billion.

Before that, the country had witnessed two back-to-back weekly declines totaling nearly USD 6 billion. Even so, analysts expect India’s forex reserves this calendar year to remain less robust compared to previous years.

Drop in Foreign Currency Assets
The data shows that foreign currency assets (FCA)—the largest component of forex reserves—fell by USD 151 million, settling at USD 556.88 billion. FCAs, when measured in dollars, reflect fluctuations in the value of non-dollar currencies such as the euro, pound, and yen.

The decline indicates that the RBI likely deployed part of its foreign currency holdings to stabilize the rupee amid market volatility.

Gold Reserves See a Big Jump
In contrast, India’s gold reserves grew significantly. The RBI reported an increase of USD 1.188 billion, taking the total value of gold holdings to USD 106.984 billion for the week.

The central bank also noted that India’s Special Drawing Rights (SDRs) rose by USD 93 million to USD 18.721 billion. Meanwhile, India’s reserve position with the International Monetary Fund (IMF) slipped by USD 97 million to USD 4.675 billion.