India’s Foreign Exchange or FOREX Reserves have nearly reached and all-time high. Is this really true? Let’s analyse and get into the important details about Forex Reserves of India.
India’s Forex Reserves
Last week, India’s federal reserves rose to $420.055 billion, a $1.7 billion increase in just one week. The recent spike in federal reserves nearly reached India’s historic peak reserves of $426.02 billion, which occurred in April 2018.
Broadly speaking, the rise in India’s reserves is a strong positive signal for the nation’s quickly growing economy, as high federal reserves are associated with a higher national GDP and more leverage in international trading deals on the global market. The spike in value also encourages Indians to trade currencies on the FOREX market as a means of leveraging their personal finances through different currencies.
Understanding FOREX
FOREX, also known as currency trading or foreign exchange, is a decentralized global market where all the world’s currencies trade. Connect FX estimates that FOREX markets contain an average daily turnover of over 5 trillion US dollars, making it the largest market in the world.
In fact, any multi-currency transaction from your local bank, PayPal, a travel center, etc. is included in the broader FOREX global market. Major financial corporations often tilt the FOREX market by moving money between a range of currencies to increase the value of their investments over time. This is why, unlike most financial transactions, the rate of exchange between different currencies varies on a daily basis, rarely staying static over a long period of time.
India’s FOREX Reserves
Foreign-exchange reserves (also known as FX reserves or FOREX reserves) is money and assets held by a central bank in a single currency. India’s FOREX reserves are controlled by the Reserve Bank of India; the central bank controls the issuance and supply of the rupee.
Despite this, its FOREX reserves are held in USD, which is standard for most nations across the developing world as it enables trade on the global market. However, India’s reserves also include several billions’ dollars worth of gold reserves and SDRS, or Special Drawing Rights, which contains savings used for trade with the International Monetary Fund (IMF).
Trading On Forex
The FOREX market is open 24 hours a day, five days a week, meaning that individuals and corporations can exchange currencies at any time. Trading on FOREX is like trading stocks: if you expect a price of a certain currency to go up compared with another currency, you buy the stronger currency, and if you expect the price to go down, you sell the weaker currency to increase savings.
Previously, currency exchange trading was mostly limited to large financial companies and governments. But trading currencies is now easily achievable for individuals on the web, who used various FOREX strategies to increase their personal wealth by buying and selling different currencies.
Conclusion
India boasts one of the fastest-growing economies in the world, a statistic recently reflected in the boost of Indian federal reserves for the global market. The growth of India’s economy makes it a strong competitor, while encouraging individuals in India to buy and trade currencies on the global market to boost their savings.
So, you have learnt about the Forex reserves of India. What are your views on the same? India’s forex reserves have inched closer to its historic peak recently. Isn’t this an amazing fact to know about the growing economy? Feel free to share your feedback.