Foreign Exchange reserve touches a new high of 451.08 billion USD

According to the weekly data released by the Reserve Bank of India, the foreign exchange reserve touched a new high of 451.08 billion USD. The foreign exchange currency assets include the depreciation or appreciation of the non-US currency like pound, Euro and Yen as well.

Highlights

The increase is mainly due to the rise in foreign currency assets. The Gold reserves of India also declined by 148 million USD. At present India holds 26.910 billion USD of gold. The reserve position of the country with IMF (International Monetary Fund) also decreased, and came down by 6 million USD. The special drawing rights with the IMF were down by 4 million USD.

Gold reserves and Foreign Exchange

The value of a currency is highly important for the foreign exchange to reach new heights. If the value of the currency is high, the foreign exchanges are good.

The value of the currency is determined by its imports and exports. The exports should be more (or imports become expensive) for the currency value to rise in the international market. If the country is buying more gold (as reserve), it means it is importing more. On the other hand, when the gold reserve is declining, exports are more.

Therefore, if the gold reserve is declining, value of the currency increases and therefore foreign exchange increases

Month: Current Affairs - December, 2019