Deposits of a foreign currency held by a central bank. Holding the currencies of other countries as assets allow governments to keep their currencies stable and reduce the effect of economic shocks. The use of foreign exchange reserves became popular after the decline of the gold standard.
Related information about foreign exchange reserve:
- Foreign-exchange reserves - Wikipedia, the free encyclopedia
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Foreign-exchange reserves (also called Forex reserves) in a strict sense are only the foreign-currency deposits held by central banks and monetary authorities.
- Guidelines for Foreign Exchange Reserve Management
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In order to make a domestic currency more stable and stronger a nation can spend a Foreign exchange reserve to purchase its own domestic banknotes.
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