India’s foreign exchange reserves moved up by $266 million to $316.76 billion during the week ended September 16, as per latest RBI data. Currently, India ranks among the top five largest foreign currency reserves in the world, after witnessing a slump to $279 billion in March 2010.
Among other surplus economies, China, Russia, Taiwan and Japan are among the countries that boast of surplus reserves in the range of $400 billion to over $3 trillion. Japan holds forex reserves of around $1.2 trillion.
However, with equity markets witnessing a sell-off and rupee depreciating sharply against the US dollar, RBI is more likely to sell dollars to stabilize domestic currency movement. Such volatility in currency markets could see Indian reserves depleting if the dollar continues to strengthen in the forex markets amid global financial turmoil.