Mumbai: An appreciating rupee, coupled with smart intervention by the apex bank, surged India’s foreign exchange reserves by $1.17 billion in the week ended June 19.

Data furnished by the Reserve Bank of India (RBI) in its weekly statistical supplement, showed that India’s foreign exchange reserves grew by $1.17 billion and stood at $355.45 billion.

For the previous week (June 12) the foreign reserves had risen by $1.57 billion and stood at $354.28 billion. They had grown by only $239.4 million and stood at $352.71 billion in the week before (June 5).

Foreign exchange reserves have increased by close to $35-$40 billion since last year as overseas investors, buoyed by the hope of economic revival, poured in dollars in the local debt and equities markets.

“The reserves have risen due to appreciation in rupee value vis-a-vis dolar. Depreciation of dollar which translated into a rise in non-dollar currencies,” Anindya Banerjee, senior manager for currency derivatives with Kotak Securities told.

Nearly 20-25 percent of the reserves are made up of non-dollar currencies. The individual movements of these currencies against the dollar also impacts the overall reserve value.

“Smart investments and intervention moves by the Reserve Bank in buying dollar also helped increase the reserves. The RBI is pretty active in the forward purchase markets since the last 18-23 months,” Banerjee said.

The RBI sells dollars, whenever the rupee crosses the Rs.64 level mark and buys, when it falls below Rs.63. Though at a very short range, experts believe that the RBI seems to be comfortable with the rupee ranging– anywhere between Rs.62-Rs.64 per dollar.

Recently, rupee has appreciated by more than 1.3 percent at Rs.63.40 per dollar from Rs.64.30.

More dollars were added into the reserves, thanks to the speculation that the RBI might rase the buying limit for rupee denominated government bonds, cited Banerjee.

“The bonds were earlier pegged at Rs.47 to a dollar. Now the talks is to to peg it at Rs.64 per dollar. This will instantly add $5-6 billion in the bond value. Though the dollar buying limit of the bonds will remain the same at $30 billion,” Banerjee said.

Major triggers to look out for the forex markets will be the outcome of the 6-year-long running Greece debt crises. Any news of a bail out might send positive signals to the global economy. Whereas a stalemate might lead to an outflow of funds from the foreign investors.

Meanwhile, the RBI continues to build-up its reserves to counter any future financial shocks and slide in rupee value like the one which was witnessed in 2008 and June, 2013.

“Apart from dealing with any future financial shocks like the one which was earlier triggered by the US Fed’s announcement of tapering, the healthy state of reserves will also act as a support to the Indian rupee’s value,” Banerjee added.

Analysts point out that no amount of reserves are enough to completely take care of any kind of financial shock.

They point out at 2008-11 period when the rupee fell by almost 33 percent, even as the economy, current-account deficit and reserve positions were strong.

In its latest report the HSBC Bank’s Global Research has estimated that an additional $60 billion of reserves are required to take the overall holdings to $420 billion, which could take care of key vulnerabilities such as unhedged external commercial debt, short-term external debt and portfolio outflows.

“This fits nicely into our FX strategist’s expectation of a gradually depreciating rupee. Other lines of defense, notably swap line arrangements with other countries, can prove as effective,” the HSBC report said.

The RBI is also cautious about the US Fed’s stand that the rate hike might take place in the later part of the year.

With higher interest rates in the US, the FPIs (Foreign Portfolio Investors) are expected to be led away from the emerging markets such as India.

During the week under review the foreign currency assets (FCAs) which forms the largest component of the forex reserves rose by $1.13 billion and stood at $330.71 billion.

The country’s gold reserves were stagnant at $19.34 billion. The bullion has remained at these levels since the week ended May 1, when it grew by $4.5 billion.

The special drawing rights (SDRs) were up by $26.6 million to $4.07 billion. The country’s reserve position with the International Monetary Fund (IMF) grew by $8.5 million to $1.32 billion.