STOCK Reserve Bank of India (RBI)
Reserve Bank of India (RBI) logo inside its headquarters in Mumbai, India Image Credit: Reuters

India's foreign exchange reserves rose for the first time in four weeks, as monetary authority likely bought dollars.

The stockpile increased by $3.7 billion to $641.59 billion as of May 3, data released by the Reserve Bank of India showed on Friday. A decline in the dollar against other major currencies in the RBI's stockpile that week probably also contributed to the rise.

Currency interventions are the Reserve Bank of India's tool of choice for crimping volatility in the rupee. Asian currencies including the yen, the won and the rupee have come under pressure versus the dollar as US officials appear likely to keep borrowing costs at elevated levels. The pile of assets totaled a record $649 billion in early April but then declined for three straight weeks.

The rupee touched a record low of 83.5750 per dollar in April and has been trading just shy of that level since then. The rupee fell 0.1 per cent in the week ending May 3, data compiled by Bloomberg show.

India's currency management practices are of particular interest because the country's bonds are set to join JPMorgan Chase & Co. indexes from June.

The US bank is on track to include the South Asian country in its emerging market debt index from June with most of its clients ready to trade despite some "teething issues," the firm's global head of index research told Bloomberg this week.

India's joining the gauge is expected to attract significant foreign capital inflows.

The central bank will also be ready to absorb new debt inflows, rather than letting its currency appreciate by a large amount, Barclays Plc analysts Shreya Sodhani and Amruta Ghare wrote in a note.