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Everything you need to know about a country's 'Forex Reserve’.

To get started, one should understand that Forex Reserves are assets—which may include gold, treasury bills, bonds, or more -- depending on the preference of the country's central bank.

These assets are in foreign currencies—mainly the USD—but can include Euro, GBP, Yuan, and even the Yen. The USD is mostly used because it is used for trade.

The primary purpose of Forex reserves is to balance the country's liabilities and to influence monetary policy. 

Economists often recommend that a country's central bank hold its reserve in a currency—or form—indirectly correlated to their fiat currency. This way, they would quickly recover should there be a market shock.


Keen to learn the forex market? Check out our other explainer articles in our Learn Forex blog. 


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