Mumbai, Sep 5 : India's foreign exchange reserves rose by $3.51 billion to $694.23 billion for the week ended August 29, data released by the RBI on Friday showed.

Foreign currency assets, a major component of the reserves, increased by $1.69 billion to $583.94 billion during the week. Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound, and yen held in the foreign exchange reserves.

The gold component of the forex reserves increased by $1.77 billion to $86.77 billion at the end of the week. Central banks worldwide have accumulated substantial amounts of gold as a safe-haven asset in their foreign exchange reserves amid uncertainty created by geopolitical tensions. The share of gold maintained by the Reserve Bank of India (RBI) as part of its foreign exchange reserves has almost doubled since 2021.

The special drawing rights in the forex kitty stood at $18.78 billion, up $40 million.

An increase in the country's foreign exchange kitty gives the RBI more headroom to strengthen the rupee vis-à-vis the US dollar. Adequate forex reserves enable the RBI to intervene in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall and curbing its volatility.

India's foreign exchange reserves are sufficient to fund more than 11 months of goods imports and about 96 per cent of external debt outstanding, RBI Governor Sanjay Malhotra said recently.

The RBI Governor said: "Overall, India's external sector remains resilient as key external sector vulnerability indicators continue to improve. We remain confident of meeting our external financing requirements."

Meanwhile, India's merchandise exports registered a 7.29 per cent increase to $37.24 billion in July this year, compared with the corresponding figure of $34.71 billion in the same month last year, according to official data released on Thursday. This shows a strengthening of the external sector.

"Despite an uncertain global policy environment, India's services and merchandise exports in July and in FY26 so far have grown substantially, and are much higher than the global exports growth," Commerce Secretary Sunil Barthwal said.

Major drivers of goods exports in July were engineering goods, electronics goods, drugs and pharma, organic and inorganic chemicals, gems and jewellery, he added.

/IANS