India's foreign exchange reserves, Asia's sixth-largest, rose to a record high on February 6 on a combination of currency inflows and revaluation gains as the dollar continued to trade weakly against global currencies.
Data released by the Reserve Bank of India (RBI) on Saturday showed foreign exchange reserves rose for the third straight week to hit $106.6 billion, up $1.6 billion from a week earlier.
Analysts say the rising reserves are inevitable, given the central bank's sustained intervention in the currency market through dollar purchases.
The RBI has been purchasing dollars to prevent its currency from appreciating too sharply in a bid to protect the export competitiveness of domestic exports, analysts say.
The is in line with other Asian central banks which have also been grappling with hefty capital inflows. Central bank intervention is seen as one of the major factors that has boosted Asia's combined foreign exchange reserves over $2 trillion at the end of January.
Foreign currency assets rose by $1.535 billion in the week under review. Reserves also include gold and special drawing rights with the International Monetary Fund.
Foreign currency assets, which are expressed in dollars, include the effect of appreciation or depreciation of non-US currencies such as the euro, sterling and yen which are held in reserves.
India's reserves were up $31.9 billion on the year, reflecting heavy foreign investment inflows into one of the world's fastest-growing economies, remittances by expatriate Indians, trade flows and revaluation gains.
India's economy, Asia's third-largest, is forecast to grow more than eight percent in the current fiscal year to March, after expanding by four percent a year earlier.
Those growth prospects attracted record foreign fund inflows of some $6.7 billion into Indian shares in 2003, helping a surge of around 73 percent in stock prices.
India's benchmark equity gauge, the Bombay exchange's top-30 index, was Asia's second-best performer last year.