Foreign Exchange Reserves

The Foreign Exchange Reserves are the foreign currency deposits held by the Domestic Monetary Authority (Central Bank or other authority) of each country. The following table presents the countries with the highest foreign-exchange reserves by incorporating the gold reserves.

Foreign Reserves -Explanation

Forex reserves are currency assets such as monetary, gold, Foreign marketable securities, and the reserve position in the IMF.

Purpose

The Foreign exchange reserves help countries to fulfill their international payments but also to hedge against exchange rate risks and to protect their currencies against speculative attacks.

Reserve Currencies

A reserve currency (or else anchor currency) is a currency that is held by governments and large financial institutions as Foreign exchange reserves. A reserve currency is often seen as a safe-haven currency in case of financial turmoil, but also as a hard-currency against weak currencies. Major reserve currencies include the US Dollar, the Euro, the British Pound Sterling, and the Japanese Yen. China's currency (Yuan Renminbi) is not considered a reserve currency due to the Chinese government's monetary controls. 

Highest Foreign Reserves

The table below presents countries with the highest reserves by incorporating the following reserve types:

■ Foreign Currency Deposits (USD, EUR, GBP, CHF, JPY etc)

■ Gold Reserves

■ Special Drawing Rights (SDRs)

■ IMF (International Monetary Fund) Reserves

Note: The Forward Currency SWAP Contracts are not incorporated (until they mature)

Table: Countries with the highest foreign-exchange reserves in USD (source: IMF)

Note: Iran does not report its foreign reserves policy and the above figure is based on estimation

■ Resources:

(i) ECB -The Currency Composition of International Reserves

https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1715.pdf?485e29e6bbcff9684dfb4cc545b2aefc

(ii) IMF -Currency Composition of Foreign Exchange Reserves

http://www.imf.org/en/News/Articles/2017/03/31/pr17108-IMF-Releases-Data-on-the-Currency-Composition-of-Foreign-Exchange-Reserves

(iii) Wikipedia -Reserve Currencies

https://en.wikipedia.org/wiki/Reserve_currency

■ Foreign Exchange Reserves

CarryTrader.com