• Foreign exchange reserves are assets denominated in a foreign currency that are held by a country’s central bank.
  • They may include foreign currencies, bonds, treasury bills and other government securities.
  • The majority of foreign exchange reserves are held in US dollars, with China being the largest holder of foreign exchange reserves in the world.
  • Economists suggest that it is best to keep foreign exchange reserves in a currency that is not directly linked to the country’s own currency.