Trade & External
Foreign exchange reserves
Foreign exchange reserves are foreign currencies, gold, and other liquid external assets held by a central bank, used to back liabilities and influence its own currency's exchange rate. A central bank sitting on $500B in reserves can sell dollars to defend its own currency during a sharp depreciation.
Why it matters
Reserve levels are a key gauge of a country's ability to withstand a currency or balance-of-payments shock.
Also known as: FX reserves, forex reserves