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.[1] 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 Swiss franc, the Indian rupees and the Chinese renminbi) and which are used to back its liabilities (e.g., the local currency issued and the various bank reservesdeposited with the Central bank by the government or financial institutions). Before the end of the gold standard, gold was the preferred reserve currency.
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 exchange rate, reducing the impact of sudden capital outflows or shocks to the economy. Adequate reserves ensure that a country can meet its international payment obligations, which helps maintain a stable exchange rate by preventing panic in the foreign exchange market. Having substantial reserves allows central banks to implement monetary policies more effectively. They can afford to maintain interest rates or engage in other measures without the immediate fear of depleting reserves, which can influence market expectations positively.[2]
Forex reserves by country
All the figures below have been converted to U.S. dollars, as different countries report data in different currencies. The U.S. dollar equivalents have been calculated using currency exchange rates as well as the gold price at the reported date. Not all countries keep gold as reserves, to avoid physical storage costs and the risks associated with it. In these cases no values are shown in the excluding gold columns.
Top five countries with the largest foreign exchange reserves have reserves of at least 500 billion USD and higher and have maintained such an amount for at least a month.[199][200]
Foreign exchange reserves for the top 5 countries
Timeline of Chinese reserves
China's foreign exchange reserves are a vital component of its economic strategy and play a significant role in its position in the global economy. Here's a detailed overview of China's foreign exchange reserves, including current figures, historical trends, and their significance. As of October 2023, China's foreign exchange reserves stood at approximately $3.57 trillion. These reserves are managed by the People's Bank of China (PBOC) and consist of various assets, including foreign currencies, government bonds, gold, and other financial instruments. During early 1990s reserves were around $20 billion as China began to open its economy and integrate into global markets. However, In 2000s following China's entry into the World Trade Organization (WTO), reserves began to surge, reaching $1 trillion by 2006. Reserves continued to climb due to strong trade surpluses and foreign investment, reaching about $2.4 trillion. Then In 2014, reserves peaked at around $4 trillion, solidifying China's status as the largest holder of foreign exchange reserves globally. Around 2015–2016, The reserves started to decline due to capital outflows, falling below $3 trillion by early 2017. Following stabilization efforts, reserves began to recover, reaching approximately $3.1 trillion by the end of 2019.[202] By mid-2021, they were back around $3.2 trillion. The reserves fluctuated but remained stable around the $3.2 trillion mark throughout 2022 and 2023, currently standing at about $3.19 trillion. China's reserves include holdings in major currencies such as the U.S. dollar, euro, yen, and others. Although a smaller portion, gold is part of the total reserves. Investments in foreign government bonds, particularly U.S. Treasury bonds, are significant. The major factors influencing China's reserves includes its constant trade surplus, which contributes to reserve accumulation. High levels of foreign investment increase reserves as investors convert their currencies into yuan. The PBOC intervenes in the currency market to stabilize the yuan, affecting reserve levels. Fluctuations in commodity prices, interest rates, and international economic dynamics influence reserves. High reserves provide a cushion against economic shocks and volatility. Reserves are essential for managing the yuan's exchange rate and maintaining its stability. A robust level of reserves bolsters confidence among international investors and trading partners. The Chinese government uses its reserves to invest globally, generating returns that can be reinvested in the domestic economy. China's foreign exchange reserves are a critical aspect of its economic strategy, reflecting its growth and integration into the global economy. With a current level of approximately $3.19 trillion, these reserves not only provide economic security but also enhance China's influence on the global financial stage. The historical growth and management of these reserves will continue to play a significant role in China's economic policy and international relations.[203]
Timeline of Japanese reserves
Japan's foreign exchange reserves are one of the largest in the world and are managed by the Bank of Japan (BOJ). These reserves are critical to Japan's financial stability, providing a buffer against economic shocks, facilitating trade and investment, and supporting the value of the Japanese yen. As of 2024, Japan's foreign exchange reserves are typically around $1.2 trillion to $1.3 trillion, making Japan one of the largest holders of reserves globally, second only to China. Japan's reserves are diversified and consist of a mix of foreign currency assets (such as US dollars, euros, and other major currencies), government bonds, gold, and Special Drawing Rights (SDRs) from the International Monetary Fund (IMF). The bulk of Japan's reserves are in the form of foreign government bonds, primarily in US Treasury securities. This allows Japan to earn returns while maintaining liquidity. Other currencies in Japan's reserves include the euro, British pound, and Australian dollar. Japan holds a relatively small proportion of its reserves in gold compared to some other large economies, though it remains a traditional store of value. Japan's gold holdings are in the range of around 765 tons as of 2024, which is a fraction of its total reserves but still significant. These represent a type of international reserve asset created by the IMF to supplement its member countries' reserves. Japan holds a portion of its reserves in SDRs. Japan's reserves play a role in stabilizing the yen (JPY). In the 1990s and beyond, Japan's foreign exchange reserves grew steadily, driven by trade surpluses, especially with the United States and other Asian countries. However, Japan's reliance on foreign assets and its deflationary environment have influenced its reserve management strategy in recent decades. Japan has increasingly diversified its foreign exchange reserves in recent years. While the reserves remain heavily concentrated in US dollars (particularly in US Treasury securities), Japan has also been exploring other options, including diversifying into other currencies like the euro or even Chinese yuan, though to a much lesser extent than some other large economies. As global economic dynamics shift (for example, due to changes in the US Federal Reserve's policies, or China's growing influence in global trade), Japan's reserve management strategies may evolve in response to these new realities. Japan's foreign exchange reserves remain a cornerstone of the country's economic policy, ensuring liquidity and stability in a highly interconnected global economy. With a strong focus on maintaining a robust and diversified portfolio of assets, these reserves help shield Japan from external shocks while supporting the value of the yen. Given Japan's position as a global financial powerhouse, its foreign exchange reserves will likely continue to play an important role in international finance for the foreseeable future.[204]
Timeline of Swiss reserves
Switzerland's foreign exchange reserves are an important aspect of its monetary policy and economic stability. These reserves are primarily managed by the Swiss National Bank (SNB) and consist of various assets, including foreign currencies, gold, and other financial instruments. As of October 2024, Switzerland's foreign exchange reserves are approximately $952.68 Billion. This value can fluctuate based on market conditions and the SNB's monetary policy actions. During Pre-2000s, Switzerland has historically maintained substantial foreign exchange reserves due to its strong economy, stable political environment, and status as a global financial center. In the late 1990s, reserves were relatively stable, around $100 billion. The early 2000s saw a significant increase in reserves as the SNB actively managed monetary policy to maintain currency stability. By 2008, reserves had grown to approximately $300 billion. The Global Financial Crisis (2008–2009), prompted the SNB to intervene in foreign exchange markets, leading to further increases in reserves.[205] By the end of 2009, reserves reached about $400 billion. The SNB continued its policy of currency intervention to prevent excessive appreciation of the Swiss franc (CHF), particularly in the context of the European debt crisis. Reserves surged to over $800 billion by 2014 as the SNB purchased large amounts of foreign currencies to stabilize the franc. In 2015, the SNB shocked markets by abandoning its peg to the euro, which resulted in increased volatility and further interventions, maintaining reserves above $700 billion. During the COVID-19 pandemic, the SNB continued its policy of maintaining low interest rates and intervening in the foreign exchange market, pushing reserves above $1 trillion by mid-2020. Switzerland's foreign exchange reserves consist of a significant portion of the reserves is held in major foreign currencies, including the U.S. dollar, euro, and Japanese yen.[205] Switzerland also has substantial gold reserves, providing a hedge against currency fluctuations and inflation.[205] The SNB also holds a variety of other assets, including bonds and equities, as part of its diversified investment strategy. Several factors impact Switzerland's foreign exchange reserves including its monetary policies, including interest rates and currency interventions, directly influence reserve levels. Changes in the value of the Swiss franc against other currencies can impact the dollar value of reserves. The overall health of the Swiss economy, trade balances, and foreign investment levels can influence reserves. Developments in global markets, including changes in commodity prices and geopolitical events, affect reserve management strategies. High reserves provide a buffer against economic shocks and enhance Switzerland's financial stability. Reserves help the SNB manage the Swiss franc's value and ensure its competitiveness in international markets. A robust reserve position fosters confidence among international investors and trading partners. Reserves serve as a crucial resource during financial crises or periods of economic volatility.[205] Switzerland's foreign exchange reserves are a key element of its economic framework, reflecting the country's financial strength and stability. With current reserves of approximately $1.01 trillion, the SNB's management of these assets plays a vital role in ensuring the stability of the Swiss franc and supporting the broader economy. The historical growth and strategic management of these reserves will continue to influence Switzerland's economic policy and its position in the global financial system.[205]
Timeline of Indian reserves
India's foreign exchange reserves are crucial for its economic stability and global trade position. These reserves consist of foreign currencies, gold, Special Drawing Rights (SDRs), and reserve position in the International Monetary Fund (IMF). Here's an overview of the current status, historical trends, and significance of India's foreign exchange reserves. As of November 2024, India's foreign exchange reserves stand at approximately $682.13 billion. This figure can fluctuate based on various factors such as trade balances, capital flows, and the Reserve Bank of India's (RBI) interventions in the forex market. During pre-1991 Era, India faced significant balance of payments crises, leading to low levels of foreign exchange reserves. By 1991, reserves were around $1 billion, barely enough to make payments for a week's import.[206] The economic reforms in 1991 led to an increase in reserves as the country began to attract foreign investment and trade improved. By the end of the 1990s, reserves reached approximately $30 billion. The 2000s saw rapid growth in reserves due to strong economic growth, trade surpluses, and rising foreign direct investment (FDI). By 2008, reserves had surged to about $310 billion. Reserves continued to grow, reaching around $400 billion by 2014. In 2018, reserves crossed the $400 billion mark again and continued to climb, largely supported by increasing FDI and robust export performance. In COVID-19 Pandemic (2020) era, despite the global economic impact of the pandemic, India's reserves increased significantly, reaching about $500 billion by mid-2020 due to a combination of lower imports, higher remittances, and inflows of foreign capital. By 2021, India's reserves peaked at around $642 billion in early 2022, marking a record high. In 2023, reserves were reported to be $598.69 billion, reflecting some fluctuations due to global economic conditions and changes in the balance of trade.[207] India's foreign exchange reserves consists of its holdings in major currencies such as the U.S. dollar, euro, and yen. India also holds a significant amount of gold, which serves as a hedge against inflation and currency depreciation. Special Drawing Rights (SDRs) allocated by the IMF, these can be used to supplement reserves. Reserve position in the IMF represents India's financial position in the IMF, which can also be utilized as reserve assets. Several factors affect the level of India's foreign exchange reserves, including a trade surplus (exports exceeding imports) contributes to reserve accumulation, while a trade deficit can lead to a decline in reserves. Foreign direct investment (FDI) and portfolio investments can significantly impact reserves. The Reserve Bank of India may intervene in the foreign exchange market to stabilize the Indian rupee, influencing reserves. Fluctuations in commodity prices, interest rates, and international trade dynamics can affect reserves. High reserves provide a buffer against external shocks and ensure economic stability.[208] Reserves help the RBI manage the exchange rate of the Indian rupee. A robust reserve position installs confidence among international investors and trading partners. Reserves serve as a safety net during crises, such as sudden capital outflows or economic downturns. India's foreign exchange reserves are an essential aspect of its economic framework, reflecting the country's growth trajectory and its integration into the global economy. With reserves currently around $598.69 billion, they play a vital role in ensuring financial stability, managing currency fluctuations, and enhancing India's standing in international trade. The historical growth and management of these reserves will continue to influence India's economic policy and global economic interactions.[209][210]
Timeline of Russian reserves
As of the latest available data in 2024, Russia's foreign exchange reserves are a critical component of its financial stability, representing the country's assets held in foreign currencies, gold, and other liquid assets. These reserves are managed by the Central Bank of Russia (CBR) and serve as a buffer against economic shocks, particularly in times of sanctions, political turmoil, or falling oil prices. Before the Russian invasion of Ukraine in February 2022, Russia's foreign exchange reserves were at record levels, exceeding $600 billion. This large amount was seen as a safeguard against potential financial crises. Following the invasion of Ukraine, Western countries, including the United States and the European Union, imposed severe economic sanctions on Russia. These sanctions targeted Russian banks, individuals, and key sectors, and led to the freezing of a significant portion of Russia's foreign exchange reserves held in Western countries, particularly in US dollars and euros. As a result, a significant portion of Russia's FX reserves (around $300 billion) was effectively locked out of international markets. In response to the freezing of its reserves, Russia accelerated its efforts to diversify its foreign exchange holdings. This included increasing its gold reserves and building up reserves in currencies like the Chinese yuan. It also sought to move away from the US dollar in trade, particularly with countries in Asia, Africa, and the Middle East. Russia has also been stockpiling gold as a hedge against potential future shocks to its reserves. Gold, being a traditional store of value, is not subject to the same sanctions and restrictions as foreign currency holdings. As part of its pivot towards non-Western financial systems, Russia has been increasing its holdings in Chinese yuan (CNY) and has forged closer economic ties with countries that are willing to accept alternative currencies in trade. The yuan has become an important component of Russia's reserves as its economy increasingly becomes oriented towards China and other non-Western partners. By 2024, Russia's FX reserves were estimated to be around $570 billion to $600 billion, with a substantial portion in gold, yuan, and other non-traditional reserve assets. The total value fluctuates due to changes in the exchange rates of the reserve currencies and adjustments to gold holdings. These reserves are essential for stabilizing the Ruble and ensuring that Russia can meet its foreign debt obligations, even under heavy sanctions. The reserves also provide the Russian government with the flexibility to intervene in currency markets if needed, to prevent excessive depreciation of the Ruble. By diversifying its foreign exchange reserves, Russia has reduced its dependence on Western financial systems, thus strengthening its geopolitical position and reducing vulnerability to further sanctions.[211]
Currency composition of forex reserves
The Currency Composition of Foreign Exchange Reserves (COFER) refers to the breakdown of the foreign exchange reserves held by central banks around the world, based on the currencies in which those reserves are denominated. These reserves are typically held in the form of deposits, bonds, and other liquid assets, and they play a critical role in managing a country's exchange rate policy, stabilizing its currency, and meeting international financial obligations. IMF releases the quarterly data on the currency composition of official foreign exchange reserves. The data are reported to the IMF on a voluntary and confidential basis. COFER data for individual countries are strictly confidential. At present there are 149 reporters, [a] consisting of member countries of the IMF, non-member countries/economies, and other foreign exchanges reserve holding entities. From Q4 2016, the data was expanded to include renminbi (CNY).[212] Monetary gold is not covered in COFER but included in reserved assets, a broader scope than that of COFER.[213]
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% to 3%. The Japanese yen is another significant reserve currency, though its share is typically lower than the euro or yuan, usually around 4% to 5%. The British pound sterling holds a smaller but still notable portion of global reserves, typically around 4% to 5%. Several other currencies, such as the Swiss franc (CHF), Canadian dollar (CAD), and Australian dollar (AUD), also make up a small but significant portion of foreign reserves. However, none of these currencies surpass the USD, EUR, or JPY in terms of global reserves. The SDR is an international reserve asset created by the International Monetary Fund (IMF). It is not a currency but rather a potential claim on the freely usable currencies of IMF member countries. The SDR basket includes the U.S. dollar, euro, Chinese yuan, Japanese yen, and British pound. While SDRs are not used as widely as the major currencies, some countries include them in their reserves.[214]
Trends and shifts in currency composition
In recent years, many central banks have diversified their foreign exchange reserves away from the U.S. dollar, driven by geopolitical risks, the desire to reduce dependency on the dollar, and the increasing importance of the Chinese yuan. However, this shift has been gradual, and the USD continues to dominate. Major events, such as the 2008 global financial crisis, the COVID-19 pandemic, and fluctuations in global trade patterns, have affected how countries allocate their foreign exchange reserves. For example, during periods of heightened uncertainty, central banks may increase their reserves in safe-haven currencies like the U.S. dollar and the Swiss franc. China's increasing global economic influence has prompted a rise in the use of the yuan for trade and reserve purposes. The International Monetary Fund's inclusion of the yuan in the SDR basket in 2016 further legitimized its use as a global reserve currency.[215]
Why the composition matters
The currency composition of foreign exchange reserves affects global financial markets, interest rates, and currency valuations. A high concentration in a single currency (especially the U.S. dollar) can lead to vulnerabilities in times of global economic stress. Conversely, diversification into other currencies may provide greater stability but also presents challenges in terms of liquidity and market depth. For example, during the early stages of the COVID-19 pandemic, many countries increased their foreign exchange reserves to prepare for potential financial disruptions, and the U.S. dollar surged temporarily as investors sought safety. However, over time, countries may seek to reduce their reliance on the U.S. dollar, especially if they are concerned about inflationary pressures or geopolitical risks linked to U.S. policy.[216]
↑ "FAQs". Currency Composition of Official Foreign Exchange Reserves. International Monetary Fund. Archived from the original on 23 April 2021. Retrieved 22 August 2020.
↑ "Key Components of COFER". Currency Composition of Official Foreign Exchange Reserves. International Monetary Fund. Archived from the original on 23 April 2021. Retrieved 22 August 2020.
↑ "Why the Composition Matters". Currency Composition of Official Foreign Exchange Reserves. International Monetary Fund. Archived from the original on 23 April 2021. Retrieved 22 August 2020.
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