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What is the Forex reserve?

Alexander Richards


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Hello, thank you for asking! 

Forex reserves are assets held by countries in order to ensure liabilities and influence monetary policies. These reserves are in the form of foreign currencies, rather than domestic ones. These assets are held in a central bank, such as the U.S. Federal Reserve.

These assets come in form of banknotes, deposits, bonds, or treasury bills, and are held on to by the government in order to ensure the stability of their own currency, or in cases of emergency, where their domestic currency rapidly devalues or becomes obsolete. 

The most common currency which is held in reserve is the U.S. dollar, as it is the most traded currency in the world, there are occasions where governments keep a reserve of the British pound, euro, or the Japanese Yen, as these currencies are stable as well, and rarely suffer from devaluation.

Countries such as China, Saudi Arabia, and Russia hold a significant amount of federal reserves, usually in the dollar, but Russia keeps some part of it in gold, these countries do this for several reasons, in order to commit trade easier, prevent the downfall from oil devaluation, or economic downfall as such.

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