Foreign exchange reserves are described reserve assets in the stability of payments and are placed in the capital account. Hence, they are typically a vital part of the International Investment Position of a Nation. The reserves are labeled as reserve assets under assets by efficient category. Foreign exchange reserves are property held by central banks and financial authorities, typically in different reserve currencies, generally the U S dollar and to a smaller extent the Euro, the Pound sterling, and the Japanese yen and used to back its liabilities.
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