Foreign Reserves

Extracted Attributes

• Holding Entities

  Central banks and monetary authorities

• Dominant Currency

  US Dollar (60-65% of global reserves)

• Primary Components

  Foreign banknotes, bank deposits, gold, silver, government securities (bonds/treasury bills), and Special Drawing Rights (SDRs)

• Secondary Currency

  Euro (20-25% of global reserves)

• Management Objectives

  Liquidity, security, and returns

Timeline

• The European Central Bank (ECB) establishes its foreign reserves through the transfer of assets from national central banks at the start of the Economic and Monetary Union. (Source: European Central Bank)

  1999-01-01

• The Chinese Renminbi (Yuan) is officially included in the International Monetary Fund's Special Drawing Rights (SDR) basket. (Source: Wikipedia)

  2016-10-01

• The Central Bank Gold Agreement expires after the ECB and 21 other central banks decide not to renew the joint statement on gold sales. (Source: European Central Bank)

  2019-09-30

• The seizure of Russian foreign reserves by Western nations occurs, accelerating global interest in de-dollarization. (Source: All-In Podcast Episode 144)

  2022-02-28

• BRICS expansion is discussed as a major geopolitical shift challenging the dominance of the US dollar in foreign reserves. (Source: All-In Podcast Episode 144)

  2023-08-24

Foreign exchange reserves

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, mostly the United States dollar and to a lesser extent the euro. Foreign exchange reserves assets can comprise banknotes, bank deposits, and government securities of the reserve currency, such as bonds and treasury bills. 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.

Web Search Results

• Foreign exchange reserves - Wikipedia

  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, mostly the United States dollar and to a lesser extent the euro. [...] | | | This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources in this section. Unsourced material may be challenged and removed. (July 2014) (Learn how and when to remove this message) | Foreign exchange reserves are also known as reserve assets and include foreign banknotes, foreign bank deposits, foreign treasury bills, and short and long-term foreign government securities, as well as gold reserves, special drawing rights (SDRs), and International Monetary Fund (IMF) reserve positions. [...] Foreign exchange reserves assets can comprise banknotes, bank deposits, and government securities of the reserve currency, such as bonds "Bond (finance)") and treasury bills. 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.[citation needed]

• List of countries by foreign exchange reserves - Wikipedia

  Foreign exchange reserves, also called Forex reserves, in a strict sense, are foreign-currency deposits held by nationals and monetary authorities. However, in popular usage and in the list below, it also includes gold reserves, special drawing rights (SDRs) and IMF reserve position because this total figure, which is usually more accurately termed as official reserves or international reserves or official international reserves, is more readily available and also arguably more meaningful. These foreign-currency deposits are the financial assets of the central banks and monetary authorities that are held in different reserve currencies (e.g., the U.S. dollar, the euro, the pound sterling, the Japanese yen, the Indian rupee, the Swiss franc, and the Chinese renminbi) and which are used to [...] Foreign-exchange reserves is generally used to intervene in the foreign exchange market to stabilize or influence the value of a country's currency. Central banks can buy or sell foreign currency to influence exchange rates directly. For example, if a currency is depreciating, a central bank can sell its reserves in foreign currency to buy its own currency, creating demand and helping to stabilize its value. High levels of reserves instill confidence among investors and traders. If market participants believe that a country has sufficient reserves to support its currency, they are less likely to engage in speculative attacks that could lead to a sharp depreciation. In times of economic uncertainty or financial market volatility, central banks can use reserves to smooth out fluctuations in [...] The U.S. dollar remains the dominant currency in global foreign exchange reserves, typically accounting for around 60% to 65% of total reserves, although this share has seen some gradual decline over the past few decades due to diversification trends. The euro is the second-largest currency held in reserves, making up around 20% to 25% of global reserves. The share of the euro fluctuates based on factors like the European Union's economic stability and the policies of the European Central Bank. The Chinese yuan (also known as the renminbi) has been increasingly used in foreign reserves, particularly after China became a part of the International Monetary Fund's Special Drawing Rights (SDR) basket in 2016. Its share is still relatively small compared to the USD and EUR, typically around 2%

• Foreign reserves and own funds - European Central Bank

  Skip to: Skip to navigation Skip to content Skip to footer БългарскиČeštinaDanskDeutschEλληνικάEnglishEspañolEesti keelSuomiFrançaisGaeilgeHrvatskiMagyarItalianoLietuviųLatviešuMaltiNederlandsPolskiPortuguêsRomnăSlovenčinaSlovenščinaSvenska Search Options Image Preview Home Media Explainers Research & Publications Statistics Monetary Policy The €uro Payments & Markets Careers Suggestions Sort by # Foreign reserves and own funds ## Foreign reserves The ECB’s foreign reserves ensure that the ECB has sufficient liquidity to conduct foreign exchange operations if needed. Those foreign reserves were originally established by means of the transfer of foreign reserve assets from the NCBs of the euro area when Stage Three of Economic and Monetary Union began on 1 January 1999. [...] The objectives for the management of the ECB’s foreign reserves are, in order of importance: liquidity, security and returns. The ECB’s foreign reserves portfolio consists of US dollars, Japanese yen, Chinese renminbi (CNY), gold and special drawing rights. The composition of the reserves changes over time, reflecting changes in the market values of invested assets, as well as the ECB’s foreign exchange and gold operations. [...] The US dollar, Japanese yen and Chinese renminbi (CNY) reserves are actively managed by the ECB and selected euro area NCBs (acting as agents of the ECB) that wish to be involved in this operational activity. NCBs can opt to pool their operational activities for the management of the ECB’s foreign reserves with other NCBs. Each NCB or pool of NCBs usually manages a single US dollar or Japanese yen portfolio as an agent of the ECB. Between 2005 and 2009 the ECB carried out sales of gold in full conformity with the Central Bank Gold Agreement and the "Joint Statement on Gold" (see link to press releases below). The ECB and 21 other central banks that were signatories of the Agreement, decided not to renew it upon its expiry in September 2019.

• Understanding Foreign Exchange Reserves: Key Purposes

  ## The Bottom Line Foreign exchange reserves are foreign-denominated assets held by a central bank for the purpose of backing liabilities and influencing monetary policy. Foreign exchange reserves can take many forms, including cash and bonds. They can provide a buffer in times of crisis, should a country's own currency lose value or it suffer another form of economic crisis. They are typically held in various instruments, such as foreign currencies, bonds, and treasury bills. Some countries, such as Saudi Arabia and Russia, utilize their reserves for economic stability. Board of Governors of the Federal Reserve System. “The International Role of the U.S. Dollar.” Federal Reserve Bank of St. Louis. “Total Reserves Excluding Gold for China.” [...] Investopedia / Eliana Rodgers ## What Are Foreign Exchange Reserves? Foreign exchange reserves are assets denominated in a foreign currency held by a central bank. These reserves are used to back liabilities and influence monetary policy. Foreign exchange reserves can include banknotes, deposits, bonds, treasury bills, and other government securities. They mainly serve as backup funds for a central government if its currency loses value or becomes insolvent. ### Key Takeaways Get personalized, AI-powered answers built on 27+ years of trusted expertise. ## Why Countries Hold Foreign Exchange Reserves [...] ## Why Countries Hold Foreign Exchange Reserves Central banks worldwide commonly hold significant foreign exchange reserves. Most of these reserves are held in the U.S. dollar since it is the most traded currency in the world. It is not uncommon for the foreign exchange reserves to be made up of the British pound (GBP), the euro (EUR), the Chinese yuan (CNY) or the Japanese yen (JPY) as well. Economists advise holding reserves in currencies not tied to the local currency, to guard against market shocks. However, this practice has become more difficult as currencies have become increasingly intertwined as global trading has become easier. ### Important Foreign exchange reserves are not only used to back liabilities but also influence monetary policy.

• Foreign Reserves Management

  Facebook Twitter Print Email # Foreign Reserves Management The Federal Reserve Act authorizes open market transactions, including foreign exchange transactions. The FOMC has authorized and directed the New York Fed to execute standalone spot and forward foreign exchange transactions in the resultant foreign currencies, to hold balances in those currencies, and to invest such foreign currency holdings, while maintaining sufficient liquidity to support foreign exchange interventions, as directed by the U.S. Treasury. The New York Fed conducts such operations pursuant to direction from the Federal Reserve's Federal Open Market Committee (FOMC). [...] SOMA and ESF foreign currency reserves are currently held in euros and Japanese yen and are passively managed. These assets are invested, as directed, in various instruments that have high degrees of liquidity and safety to achieve the policy directives of the Federal Reserve and the U.S. Treasury. The SOMA and the ESF foreign currency reserves are managed so that their risk and return characteristics match as closely as possible. To the extent practical, investments are split proportionately between the SOMA and ESF holdings. Close Federal Reserve Bank Seal