This unprecedented rise comes despite significant headwinds, including a $5 billion currency swap maturation and intensive RBI intervention after U.S. President Donald Trump imposed fresh tariffs on Indian goods over the country's Russian oil purchases.

India's foreign exchange reserves slightly increased during the week ending August 8, even as the Reserve Bank of India aggressively intervened to prevent the rupee from hitting its historic lows, according to economist calculations released ahead of Friday's official data.

Market Pressures Escalate Higher

The rupee faced severe pressure during the week, threatening to breach its all-time low of 87.95 against the dollar. Trump's tariff announcement specifically targeted India's continued energy trade with Russia, making currency traders confused and forcing the RBI sweep into action across multiple markets.

"The RBI intervened in both onshore spot and non-deliverable forward markets to defend the rupee," said banking sources familiar with the operations. The central bank's total dollar selling reached $5.6 billion for the week, including the $5 billion swap delivery.

Revaluation Rescue Brings Respite

Despite this substantial outflow, rising gold prices and a weakening dollar provided crucial support through revaluation gains. Gaura Sen Gupta, economist at IDFC First Bank, estimates these favorable market movements generated a $9.8 billion boost to reserve valuations.

"The rise in FX reserves was fueled by a revaluation boost of $9.8 billion, reflecting higher gold prices and a weaker dollar," Sen Gupta explained. Also her prompt calculations suggest reserves increased by over $4 billion during the week.

Tactical Intervention by RBI

The RBI's approach revealed careful strategic planning. Rather than relying heavily on spot market sales, which directly drain reserves, the central bank seems to have emphasized non-deliverable forward interventions to influence offshore sentiment without immediate reserve impact.

"This implied spot intervention in the week was less and that the RBI would have relied on NDF," Sen Gupta noted, highlighting the central bank's strategic preference for preserving its dollar ammunition while still defending the currency.

Broader Implications Anticipated

The episode highlights the balancing act the central bank faces as it manages currency stability amid rising geopolitical and market pressures. Official reserve data, due on Friday, will confirm whether whether the estimated gains actually materialized. The data will provide crucial insight into the RBI's intervention capacity as global uncertainties continue to pressure emerging market currencies.

For now, the preliminary calculations suggest India's financial managers successfully navigated a turbulent week, using favorable market conditions to offset the costs of currency defense operations.