Forex Reserve

[Bindas36]

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Reserves are used as savings for potential times of crises, especially balance of payments crises. Original fears were related to the current account, but this gradually changed to also include financial account needs.[8] Furthermore, the creation of the IMF was viewed as a response to the need of countries to accumulate reserves. If a specific country is suffering from a balance of payments crisis, it would be able to borrow from the IMF. However, the process of obtaining resources from the Fund is not automatic, which can cause problematic delays especially when markets are stressed. Therefore, the fund only serves as a provider of resources for longer term adjustments. Also, when the crisis is generalized, the resources

[Bindas36]

hello all F0rex reserve are cash and other reserve assets held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets ...

[Lipsee]

sir mien tonew trader hoon or abi mujhy forex reverse k bare mien belkul bee pata nahi as lye abi jab mien seekh lo ga tu mine as mien apna knowledge zaror share karo ga.

[sweety faiza]

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or manafa b kamaty han ya . hum is sy tab earn kar sakty han jab hum is ko achi tarhan read karyn is ki informatin hasil karyn .

[BlindX]

How Foreign Exchange Reserves Work
Foreign exchange reserves can include banknotes, deposits, bonds, treasury bills and other government securities. These assets serve many purposes but are most significantly held to ensure that a central government agency has backup funds if their national currency rapidly devalues or becomes all together insolvent.


It is a common practice in countries around the world for their central bank to hold a significant amount of reserves in their foreign exchange. Most of these reserves are held in the U.S. dollar since it is the most traded currency in the world. It is not uncommon for the foreign exchange reserves to be made up of the British pound (GBP), the euro (EUR), the Chinese yuan (CNY) or the Japanese yen (JPY) as well.

Economists theorize that it is better to hold the foreign exchange reserves in a currency that is not directly connected to the 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 more intertwined as global trading has become easier.

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Foreign exchange reserves (also called forex reserves or FX reserves) are cash and other reserve assets held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets .

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and more information of forex reserve
Reserves assets allow a central bank to purchase the domestic currency, which is considered a liability for the central bank (since it prints the money or fiat currency as IOUs). Thus, the quantity of foreign exchange reserves can change as a central bank implements monetary policy,[4] but this dynamic should be analyzed generally in the context of the level of capital mobility, the exchange rate regime and other factors. This is known as Trilemma or Impossible trinity. Hence, in a world of perfect capital mobility, a country with fixed exchange rate would not be able to execute an independent monetary policy.

A central bank which chooses to implements a fixed exchange rate policy may face a situation where supply and demand would tend to push the value of the currency lower or higher (an increase in demand for the currency would tend to push its value higher, and a decrease lower) and thus the central bank would have to use reserves to maintain its fixed exchange rate. Under perfect capital mobility, the change in reserves is a temporary measure, since the fixed exchange rate attaches the domestic monetary policy to that of the country of the base currency. Hence, in the long term, the monetary policy has to be adjusted in order to be compatible with that of the country of the base currency. Without that, the country will experience outflows or inflows of capital. Fixed pegs were usually used as a form of monetary policy, since attaching the domestic currency to a currency of a country with lower levels of inflation should usually assure convergence of prices.

In a pure flexible exchange rate regime or floating exchange rate regime, the central bank does not intervene in the exchange rate dynamics; hence the exchange rate is determined by the market. Theoretically, in this case reserves are not necessary. Other instruments of monetary policy are generally used, such as interest rates in the context of an inflation targeting regime. Milton Friedman was a strong advocate of flexible exchange rates, since he considered that independent monetary (and in some cases fiscal) policy and openness of the capital account are more valuable than a fixed exchange rate. Also, he valued the role of exchange rate as a price. As a matter of fact, he believed that sometimes it could be less painful and thus desirable to adjust only one price (the exchange rate) than the whole set of prices of goods and wages of the economy, that are less flexibl

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Foreign exchange reserves include foreign banknotes, foreign bank deposits, foreign treasury bills, and short and long-term foreign government securities, as well as gold reserves, special drawing rights (SDRs), and International Monetary Fund (IMF) reserve positions.

Foreign exchange reserves are called reserve assets in the balance of payments and are located in the capital account, and are usually an important part of the international investment position of a country. The reserves are labeled as reserve assets under assets by functional category. In terms of financial assets classifications, the reserve assets can be classified as gold bullion, unallocated gold accounts, special drawing rights, currency, reserve position in the IMF, interbank position, other transferable deposits, other deposits, debt securities, loans, equity (listed and unlisted), investment fund shares and financial derivatives, such as forward contracts and options. There is no counterpart for reserve assets in liabilities of the International Investment Position. Usually, when the monetary authority of a country has some kind of liability, this will be included in other categories, such as Other Investments. [3] In the Central Bank's Balance Sheet, foreign exchange reserves are assets, along with domestic credit

[BlindX]

forex reserves or FX reserves) are cash and other reserve assets held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.[1]

Foreign exchange reserves assets can comprise banknotes, deposits, bonds, treasury bills and other government securities of the reserve currency.[2] Some countries hold a part of their reserves in gold, and special drawing rights are also considered reserve assets. Often, for convenience, the cash or securities are retained by the central bank of the reserve or other currency and the “holdings” of the foreign country are tagged or otherwise identified as belonging to the other country without them actually leaving the vault of that central bank. From time to time they may be physically moved to the home or other country.

Normally, interest is not paid on foreign cash reserves, nor on gold holdings, but the central bank usually earns interest on the government securities.

[Zahra]

Ji haan forex reserve se aapko bahut hi jyada fayda hota hai Kyunki aap Jitna Jyada is Reserve Karte Hain Humko Itna Jyada profit gain hota rahata hai isliye ismein Jyada Se Jyada share Karen Taki aapka Jo profile Hai uski aur rahe ho Agar aapka profit aapko lagta hai kiski aur nahin hai to aap ko share Jarur karna chahie Agar aapko lagta hai ki vah kyon hai to aap use reserve kara Den tabhi vah aapka security Gaya aur aapko koi pareshani bhi nahin Rahegi jo ki ek bahut hi jyada Achcha platform mein