Money held by a central bank to pay debts, if needed
Foreign exchange
Exchange rates
Currency band
Exchange rate
Exchange rate regime
Exchange-rate flexibility
Dollarization
Fixed exchange rate
Floating exchange rate
Linked exchange rate
Managed float regime
Dual exchange rate
Markets
Foreign exchange market
Futures exchange
Retail foreign exchange trading
Assets
Currency
Currency future
Currency forward
Non-deliverable forward
Foreign exchange swap
Currency swap
Foreign exchange option
Historical agreements
Bretton Woods Conference
Smithsonian Agreement
Plaza Accord
Louvre Accord
See also
Bureau de change
Hard currency
Currency pair
Foreign exchange fraud
Currency intervention
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Foreign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets such as gold and silver held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.[1]
Foreign exchange reserves assets can comprise banknotes, bank deposits, and government securities of the reserve currency, such as bonds and treasury bills.[2] Some countries hold a part of their reserves in gold, and special drawing rights are also considered reserve assets. Often, for convenience, the cash or securities are retained by the central bank of the reserve or other currency and the "holdings" of the foreign country are tagged or otherwise identified as belonging to the other country without them actually leaving the vault of that central bank. From time to time they may be physically moved to the home or another country.
Normally, interest is not paid on foreign cash reserves, nor on gold holdings, but the central bank usually earns interest on government securities. The central bank may, however, profit from a depreciation of the foreign currency or incur a loss on its appreciation. The central bank also incurs opportunity costs from holding the reserve assets (especially cash holdings) and from their storage, security costs, etc.
^"IMF Data - Currency Composition of Official Foreign Exchange Reserve - At a Glance". International Monetary Fund. Retrieved 28 June 2019.
^"IMF Data". Archived from the original on 8 October 2014. Retrieved 11 June 2015.
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