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China has the largest forex reserves in the world — here's how other countries measure up
Courtesy of: Visual Capitalist
In the high stakes game of international trade, holding onto a stockpile of foreign cash gives you options.
Forex reserves can help buoy the local currency or even provide much-needed insurance in the case of a national economic emergency. And when reserves are plentiful, a country can even use them to wield influence on international affairs – after all, most financial assets are simultaneously someone else’s liability.
FOREX RESERVES BY COUNTRY
Today’s infographic comes to us from HowMuch.net, and it resizes countries on a world map based on their foreign currency reserves, according to the most recent IMF data.
Here is a list of the top 10 countries – China tops the list with a solid $3.2 trillion in reserves held:
WHY HOLD FOREIGN CURRENCY RESERVES?
And now, a practical question: why do these countries hold foreign currency reserves in the first place?
Here are seven reasons, as originally noted by The Balance:
- Jeff Desjardins, Visual Capitalist
- May 29, 2018, 2:18 Am
- Forex reserves can help a country buoy local currency or even provide insurance in the case of a national economic emergency.
- China tops other countries in foreign reserves with $3.2 trillion held.
- The dollar and the euro are the most common reserve currencies used in international transactions, so the US and EU don't need to hold a lot of reserves.
Courtesy of: Visual Capitalist
In the high stakes game of international trade, holding onto a stockpile of foreign cash gives you options.
Forex reserves can help buoy the local currency or even provide much-needed insurance in the case of a national economic emergency. And when reserves are plentiful, a country can even use them to wield influence on international affairs – after all, most financial assets are simultaneously someone else’s liability.
FOREX RESERVES BY COUNTRY
Today’s infographic comes to us from HowMuch.net, and it resizes countries on a world map based on their foreign currency reserves, according to the most recent IMF data.
Here is a list of the top 10 countries – China tops the list with a solid $3.2 trillion in reserves held:
WHY HOLD FOREIGN CURRENCY RESERVES?
And now, a practical question: why do these countries hold foreign currency reserves in the first place?
Here are seven reasons, as originally noted by The Balance:
- Forex reserves allow a country to maintain the value of their domestic currency at a fixed rate
- Countries with floating exchange rates can buy up foreign currencies or financial instruments to reduce the value of their domestic currency
- Forex reserves can help maintain liquidity during an economic crisis
- Reserves can provide confidence to foreign investors, showing that the central bank has the ability to take action to protect their investments
- Foreign currency reserves give a country extra insurance in meeting external payment obligations
- Forex reserves can be used to fund certain sectors, like building infrastructure
- They also provide a means of diversification, which allows central banks to reduce the risk of their overall portfolios
