U.S. foreign reserves, including foreign currencies of the best way to learn about investing mostly euros and yen, were valued at $250 billion in September 2024. The United Kingdom, which also did not make the top 10 list, held $213 billion in foreign reserves as of June 2024. Here are the 10 countries with the largest foreign currency reserve assets.

By buying and selling currencies on the open market, a central bank can influence the value of its country’s currency, which can provide stability and maintain investor confidence. For instance, if the value of the Brazilian real starts to fall during an economic downturn, the Central Bank of Brazil can step in and use its foreign reserves to bid up its value. Conversely, countries can intervene to stop their currencies from appreciating and make their exports cheaper. The central bank assures foreign investors that it’s ready to take action to protect their investments. It will also prevent a sudden flight to safety and loss of capital for the country. In that way, a strong position in foreign currency reserves can prevent economic crises caused when an event triggers a flight to safety.

List of countries by foreign-exchange reserves

A reserve currency is a foreign currency that a central bank or treasury holds as part of its country’s formal foreign exchange reserves. Countries hold reserves for a number of reasons, including to weather economic shocks, pay for imports, service debts, and moderate the value of their own currencies. In a central bank’s accounts, foreign exchange reserves are called reserve assets in the capital account of mcdonald’s stock a buy dow jones giant gets rare rating from pickiest analyst the balance of payments, and may be labeled as reserve assets under assets by functional category. There is no counterpart for reserve assets in liabilities of the International Investment Position.

India’s foreign exchange reserves declined $17.76 billion last week

With a considerable war chest of foreign currencies, China has the ability to invest in foreign assets, diversify its holdings, and exert influence on global financial markets. The euro, introduced in 1999, is the second most commonly held reserve currency Jesse livermore blog in the world. According to the International Monetary Fund (IMF), which is charged with promoting global growth and trade, central banks hold more than $6.7 trillion in dollar reserves versus 2.2 trillion in euros as of Q4 2019. As of July 2023, China has by far the most reported foreign currency reserves of any country, with more than $3 trillion. India, Russia, Saudi Arabia, Switzerland, and Taiwan also have large reserve holdings.

The U.S. treasury market remains by far the world’s largest and most liquid—the easiest to buy into and sell out of—bond market. Countries like Germany and China—which have the largest trade surpluses—also have the most currency reserves because they receive U.S. dollars and other foreign currencies when they provide exports. Manipulating and adjusting the reserve levels can enable a central bank to prevent volatile fluctuations in currency by affecting the exchange rate and increasing the demand for and value of the country’s currency.

1. Countries without reserve currency status fear that their fates are tied to macroeconomic and political decisions that are outside of their control.
2. Central banks often hold currency in the form of government bonds, such as U.S. treasuries.
3. Central banks throughout the world have sometimes cooperated in buying and selling official international reserves to attempt to influence exchange rates and avert financial crisis.
4. Foreign exchange reserves are not only used to back liabilities but also influence monetary policy.

India’s forex reserves see sharpest weekly drop on record, hit over four-month low

Between 2004 to 2011, China averaged $363 billion in annual foreign exchange purchases. Analysts suspected that China ramped up its foreign exchange purchases to suppress the value of its currency and boost trade account surpluses. Some countries have a fixed exchange rate, i.e., their currency shadows another currency or a commodity. Treasury Secretary Janet Yellen, say that the aggressive use of sanctions could threaten the dollar’s hegemony.

Understanding Forex Reserves: What They Are and Why They Matter

It then used its reserves with the IMF to make a debt payment to the European Central Bank. The huge sovereign debt the Greek government incurred led to the Greek debt crisis. Sixth, some countries use their reserves to fund sectors, such as infrastructure. China, for instance, has used part of its forex reserves for recapitalizing some of its state-owned banks.