International Reserves

Posted on 2023-04-18

International reserves refer to foreign currency deposits held by central banks, financial institutions, and other government agencies. These reserves are used to finance international trade transactions, stabilize exchange rates, and provide a cushion against balance of payments crises.

The composition of international reserves typically includes currencies such as the US dollar, euro, Japanese yen, and British pound, as well as gold and other assets. The size and composition of a country's international reserves can affect its ability to manage its exchange rate and respond to economic shocks.

Central banks can use their reserves to intervene in foreign exchange markets by buying or selling currencies to influence the value of their own currency. This is often done to maintain a stable exchange rate or to prevent excessive currency volatility.

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