Foreign exchange reserve adequacy

Abstract

According to NASDAQ, foreign exchange reserves (forex reserves) “is the total foreign currency deposits and bonds held by a country’s central bank and financial authorities.” However, reserves in a country also include “its gold holdings, exchangeable foreign currencies held in banks, plus balances of exchange reserve and special drawing rights (SDR) held with the International Monetary Fund (IMF).” Reserves are held in major currencies like US dollar, Euro, Pound sterling, Swiss francs, Canadian dollar, Japanese yen, and Australian dollar. Other currencies form a small pool of the total international forex reserves.