Foreign Exchange Reserves

Foreign exchange reserves are the assets a central bank holds in currencies other than its own — typically deposits and government securities in the major reserve currencies, alongside gold and claims on the IMF. They are the resource an authority draws on to settle official obligations, to intervene in its own currency and to defend a peg or a band. Reserves are watched because they are one of the few public statements of an authority's capacity to act. Central banks publish reserve figures on a stated schedule, and a change in them is what makes an intervention visible after the fact. Reading them takes care, though. Reserves are valued in a reporting currency, so their level moves with exchange rates and asset prices as well as with any actual buying and selling, and some authorities hold positions in forwards or swaps that a headline reserve figure does not show. The publishing central bank's own methodology and data template are what say which is which.