Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved and seek independent advice if necessary.Please read the complete Risk Disclosure. Hong Kong grew reserves over the past year thanks to continued haven inflows. Looking ahead, lingering economic uncertainty may test the peg and reserves at times. Industry-specific and extensively researched technical data (partially from exclusive partnerships).
Forex Reserves by Country 2024
Reserves provide key support for the Singapore dollar and backstop the country’s status as a global finance hub. To prevent excessive currency appreciation, Taiwan tapped its reserves to buy and sterilize surplus dollars. The government aims to maintain a competitive exchange rate to support the nation’s vital export industries. Robust reserves provide South Korea with an important buffer against external shocks and exchange rate volatility.
- A country might draw down its foreign reserves if it needs to sell them in order to stabilize its currency or prop up its economy, especially if the domestic currency falters.
- While dwarfed by China’s stash, this still represents a sizable war chest that underpins the yen’s status as a major global currency.
- Foreign currencies are not the only form of asset at a government’s disposal.
- However, reserves may face pressure if global growth slows and energy demand declines.
International reserves are a country’s “external assets”—including foreign currency deposits and bonds held by central banks and monetary authorities, gold and SDRs. The top 10 holders of international reserves account for nearly two-thirds of the world’s total foreign currency reserves. Twenty years ago it had only US$18 billion, and ten years ago US$146 billion. Second is Japan with US$1.3 trillion (as of December 2012.) They are the only two countries with reserves above US$1trillion. Foreign exchange reserves (also called Forex Reserves) are assets that are held on reserve by a central bank. The purpose of Forex Reserves is to influence monetary policy and back liabilities.
Top Countries by Foreign Exchange Reserves
This makes trading with other countries easier, because most of the trading that China conducts takes place using US dollars. Without adequate reserves, a country may be unable to pay for critical imports, such as crude oil, or service its external debt. Inadequate reserves can also limit a central top 10 foreign reserve country bank’s available responses in the event of an economic crisis. Economists assert that it is prudent to hold foreign exchange reserves in a currency that is not directly linked to a country’s own currency, in order to provide a barrier should there be a market shock. However, this practice has become more difficult as currencies have become increasingly intertwined as global trading has become easier.
Tencent’s Billionaire Pony Ma Becomes China’s Richest Amid Tech Resurgence
Foreign-exchange reserves play a crucial role in a country’s economic and financial stability. These reserves are made up of foreign currencies, bonds, treasury bills and other government securities that are held by a nation’s central bank. A nation’s economic stability relies heavily on its foreign currency reserves. Inadequate reserves can severely hinder a country’s ability to pay for crucial imports and service external debt.
Robust reserves should support higher sovereign credit ratings for Brazil going forward. Switzerland’s reserves expanded over the past year as continued haven demand for the Swiss franc compelled the central bank to intensify currency intervention. Even though most of the world left the gold standard in 1971, most countries still retain large gold reserves.
List of Countries by Foreign-Exchange Reserves
Russia tapped its reserves to reduce market chaos and backstop its banking system as sanctions roiled its economy. Going forward, remaining reserves will allow Russia to partly manage exchange rate volatility and pay foreign obligations. Robust reserves underscore India’s increasing prominence in the global economy. The government has used reserves to moderate rupee exchange rate fluctuations amid periods of market turmoil. Reserves also enable India to pay for critical imports like oil, gold and fertilizer.
Such an arrangement makes international trade easier to execute since most of the trading takes place using the U.S. dollar. To highlight one of the top 10 above, India held $655 billion in foreign currency reserve assets as of May 2024. Its central bank, the Reserve Bank of India, intervenes in the foreign exchange market to stem excess volatility in its domestic currency, the rupee.
Reserves also enable Canada to smoothly participate in foreign trade and international commodity markets. Canada has tapped its reserves at times to temper excessive strength in the Canadian dollar driven by spikes in oil exports or global haven demand. This leaning against currency appreciation prevents damage to Canada’s manufacturing and export competitiveness. Known for world-leading technology and manufacturing exports, South Korea holds over $450 billion in foreign-exchange reserves as of August 2023.
IRs are also an important indicator of a country’s ability to repay foreign debt and are a factor in determining a country’s credit rating. Emerging markets like India, Brazil and South Korea leverage reserves to manage exchange rates, pay foreign debts, and secure critical imported resources. Leading financial hubs like Hong Kong and Singapore use reserves to defend currencies and reinforce stability. The government has intervened in forex markets on several occasions to support the Brazilian real.
A simple explanation for China’s accumulation of foreign currency could be its consistently positive and substantial trade balance. When China exports goods and services, it accepts the foreign currency, usually U.S. dollars, and holds that currency in reserve. In addition to facilitating trade, most countries, including China, also hold foreign exchange reserves to ensure the stability of their currencies and facilitate other foreign transactions. The world’s largest current foreign exchange reserve holder is China, a country holding more than $3 trillion of its assets in a foreign currency.
The central bank then uses the dollars to purchase U.S. government securities, which are considered to be among the safest investments on the planet. Saudi Arabia also holds considerable foreign exchange reserves, as the country relies mainly on the export of its vast oil reserves. It keeps large amounts of foreign funds in reserves to act as a cushion should this happen. A country’s stockpile of foreign-exchange reserves offers an important indication of its economic standing and resilience to external shocks.
An example of a Forex Reserve is the foreign money held by the US Federal Reserve Bank. Forex reserves may include foreign currencies, treasury bills, bonds and other government securities. Russia’s foreign exchange reserves are held mostly in U.S. dollars, much like the rest of the world, but the country also keeps some of its reserves in gold.