Foreign exchange reserves
Foreign exchange reserves, also known as forex reserves or FX reserves, are assets held by a country's central bank in foreign currencies. These reserves are used to support the country's currency, manage external trade, and provide liquidity in times of economic uncertainty ¹. *Components of Foreign Exchange Reserves* - *Foreign Currency Assets (FCAs)*: These are the largest component of forex reserves, held in currencies like the US dollar, euro, pound sterling, Australian dollar, and Japanese yen. FCAs include deposits with foreign central banks and commercial banks, as well as investments in foreign securities. - *Gold Reserves*: Gold is a traditional store of value and a hedge against inflation. India's gold reserves are held domestically and in custody of the Bank of England and Bank for International Settlements. - *Special Drawing Rights (SDRs)*: SDRs are international reserve assets created by the International Monetary Fund (IMF) to supplement member countries...