February 11, 2014

India’s FX Reserves Increased


Last week Mumbai reported a loss of $685.1 million in India’s currency reserves. About each week there is a report on FX currency reserves for some countries like India. The reserves matter as it is a sign of whether the country is going to increase in growth and stability, stay the same, or see economic hardship. The Reserve Bank of India reported a significant and healthy increase to their reserves. All reserves are reported in USD no matter the country which is why the $544.7 million reported increase is in USD. The reserves are not at $275.35 billion after dipping to $247.81 billion in the previous week. Taking a look at how these reserves increase or decrease can help you understand how to assess the market as a beginner.

FX Current Events turn into Examples

Currency is always appreciating and depreciating. Investors know that they need to look for which currency is currently gaining in value and pit it against the currency losing value. It helps the investor make more money on the pip movement in the currency pair for FX trades. Central banks are also relying on changes in appreciation and depreciation since they too can make money or lose it based on current foreign exchange rates.

According to the RBIs recent announcement of reserve increases it is due mainly to pound, yen, and euro value changes rather than the depreciation of the USD. Gold reserves have not changed in this same period. Gold is often considered a safe haven, so it can remain unchanged largely due to lack of interest in increasing one’s holdings and thus value of gold. It does not mean gold didn’t change slightly in value, but not enough to matter overall in the reserves. It is not just the FX appreciation and depreciation that can change assets. It can also be about buying or selling goods.

Along with this news is the special drawing rights, which increased by approximately $30 billion because India’s reserve position increased with the IMF. This is good news for India as they try to draw on the special rights they hold. India is working to improve their country with some major projects which requires the increase in funds available to them.

FX for India Becoming more Important

India is working very hard to get a lot of interest in the FX community. There are still some concerns over the Indian rupee for traders though. The rupee can be scammed very easily and has been in the past. Like its neighbours there is a large mistrust when it comes to financial products. A lot of it has to do with the origin of many credit card scam gangs which can be traced back to China, India, and the Middle East. It makes things like FX, which is already complicated, quite scary in terms of the India rupee. This perception is changing with more and more investors starting to see that India is working very hard towards a better country for its people and for tourists. It is an emerging market to watch and perhaps eventually trade the rupee.




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