Record reserves boost India central bank’s firepower to shield rupee

[MUMBAI] India’s foreign exchange reserves climbed to a record, bolstering the country’s ability to shield the rupee from excessive volatility and speculation.

The stockpile rose by about US$8.1 billion to US$709.4 billion in the week ended Jan 23, based on the data released by the Reserve Bank of India (RBI) on Friday (Jan 30). This beats a previous high of US$704.9 billion set in September 2024.

A larger reserve buffer gives the central bank more firepower to defend the rupee. The currency is the worst performer in emerging markets in 2026, and is weighed down by outflows from equities and a delay in clinching a trade deal with the US.

The broad increase in gold prices has helped to prop up the reserves. The precious metal is set for its best monthly gain since 1982 in January, rising around 18 per cent on the back of geopolitical tensions.

Anubhuti Sahay, head of India economic research, Standard Chartered Bank, said: “The latest rise in the reserves reflects a positive valuation effect from gold, (and) it also gives the RBI breathing space in an uncertain global environment.

“Going (forward), however, key variables are the size of the RBI’s short forward dollar book, as well as (the) lack of visibility of how much more it can build up reserves in an environment of pressure on the rupee.” BLOOMBERG