Another danger of using gold as a reserve is that the asset is only worth what someone else is willing to pay for it. During an economic crash, that would put the power of determining the value of the gold reserve, and therefore Russia’s financial fallback, into the hands of the entity willing to purchase it. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies. Login to filter countries by characteristic, economic data category and geography, view data over a date range, compare dates and download data. For more detailed analyses and updates on global economic trends, follow my LinkedIn profile and stay informed about the latest developments in global finance.

Why do countries hold reserves?

“Sanctions are an effective tool, but we have to be careful,” CFR’s Benn Steil told NPR. Some experts say this benefit is modest, pointing to the fact that other developed countries are able to borrow at similarly low rates. Former Federal Reserve Chair Ben Bernanke has argued that the United States’ declining share of the global economy and the rise of other currencies such as the euro and yen have eroded the U.S. advantage. “The exorbitant privilege is not so exorbitant any more,” Bernanke wrote in 2016. According to an analysis of foreign exchange reserves, China has the largest foreign exchange reserve in the world, holding over $3.6 trillion.

Foreign Currency Reserves: Overview

Japan’s significant reserves are vital for maintaining economic stability and supporting its export-oriented economy. To highlight one of the top 10 above, India held $655 billion in foreign currency reserve assets as of May 2024. Its central bank, the Reserve Bank of India, intervenes in the foreign exchange market to stem excess volatility in its domestic currency, the rupee. However, foreign currency is the most abundant asset in most foreign reserves, and most nations hold the vast majority of their foreign currency reserves in U.S. dollars, followed by euros and the Japanese yen. Many experts agree that the dollar will not be overtaken as the world’s leading reserve currency anytime soon. More likely, they say, is a future in which it slowly comes to share influence with other currencies, though this trend could be accelerated by the aggressive use of U.S. sanctions and growing U.S. financial instability.

Data Download

1. By cutting off the ability to transact in dollars, the United States can make it difficult for those it blacklists to do business.
2. At the sixth spot, Taiwan holds $598,819.67 million in total reserves, with $570,595.00 million in forex and $28,224.67 million in gold.
3. Another danger of using gold as a reserve is that the asset is only worth what someone else is willing to pay for it.
4. The substantial gold reserves underscore the country’s economic strength and financial security.
5. Such digital currencies are “mined” and transferred via a decentralized network of computers without any issuing authority.

For instance, if the value of the Brazilian real starts to fall during an economic downturn, the Central Bank of Brazil can step in and use its foreign reserves to bid up its value. Conversely, countries can intervene to stop their currencies from appreciating and make their exports cheaper. Gold is an important component of central bank reserves because of its safety, liquidity and return characteristics – the three key investment objectives for central banks. As such, they are significant holders of gold, accounting for around a fifth of all the gold that has been mined throughout history. China leads the global list with an overwhelming total of $3,469,776.82 million in foreign exchange reserves, including $3,308,705.00 million in forex reserves and $161,071.82 million in gold reserves.

Foreign exchange reserves can include banknotes, deposits, bonds, treasury bills, and other government securities. These assets serve many purposes but are most significantly held to ensure that a central government agency has backup funds if their national currency rapidly devalues or becomes entirely insolvent. John Maynard Keynes proposed the bancor, a supranational currency to be used as unit of account in international trade, as reserve currency under the Bretton Woods Conference of 1945. Even though most of the world left the gold standard in 1971, most countries still retain large gold reserves. The United States, followed by Germany and Italy, held the largest amount of gold reserves worldwide as of December 2018. Treasury Secretary Janet Yellen, say that the aggressive use of sanctions could threaten the dollar’s hegemony.

1. U.S. foreign reserves, including foreign currencies of mostly euros and yen, were valued at $250 billion in September 2024.
2. See Alan Greenspan, 2007;29and Frankel, Chinn (2006) who explained how it could happen by 2020.3031However, as of 2022 none of this has come to fruition due to the European debt crisis which engulfed the PIIGS countries from 2009 to 2014.
3. For more detailed analyses and updates on global economic trends, follow my LinkedIn profile and stay informed about the latest developments in global finance.
4. The COVID-19 pandemic led to a resurgence in currency manipulation, with advanced economies such as Switzerland and Taiwan buying dollars, euros, and other reserve currencies to depreciate their own.

The euro is the second most used reserve currency, accounting for roughly 20 percent of global foreign exchange reserves. The European Union rivals the United States in economic size, exports more, and boasts a strong central bank and robust financial markets—factors that make its currency a viable challenger to the dollar. But the lack of a common treasury and a unified European bond market limits its attractiveness as a reserve currency, according to Setser.

Tech evangelists dream of a world where cryptocurrencies such as Bitcoin replace government-backed currencies. Such digital currencies are “mined” and transferred via a decentralized network of computers without any top 10 foreign reserve country issuing authority. Proponents—including El Salvadoran President Nayib Bukele, who has made Bitcoin legal tender—argue that such a system would free countries from the whims of other nations’ monetary policies.

In the past due to the Plaza Accord, its predecessor bodies could directly manipulate rates to reverse large trade deficits. Quarterly official gold holdings from 2000, as well as the latest available month-end data for the Top 100 holders. Treasury securities, making it the second-largest foreign holder of U.S. debt after Japan. This chart was updated in November 2024 and reports data available at that time. Data are taken from the International Monetary Fund’s International Financial Statistics (IFS), November 2024 edition, and other sources where applicable. IFS data are two months in arrears, so holdings are as of September 2024 for most countries, June 2024 or earlier for late reporters.

However, this practice has become more difficult as currencies have become increasingly intertwined as global trading has become easier. Because Canada’s primary foreign-trade relationship is with the United States, Canadian consumers, economists, and many businesses primarily define and value the Canadian dollar in terms of the United States dollar. Thus, by observing how the Canadian dollar floats in terms of the US dollar, foreign-exchange economists can indirectly observe internal behaviours and patterns in the US economy that could not be seen by direct observation. Also, because it is considered a petrodollar, the Canadian dollar has only fully evolved into a global reserve currency since the 1970s, when it was floated against all other world currencies. Switzerland ranks third with $864,426.87 million in total reserves, comprising $794,931.41 million in forex and $69,495.46 million in gold.

Taiwan’s reserves are crucial for maintaining its economic resilience and supporting its export-driven economy. The percentage share held in gold of total foreign reserves is calculated by the World Gold Council. The value of gold holdings is calculated using the end of quarter LBMA Gold Price, which is published daily by ICE Benchmark Administration for the value of other reserves are taken from IFS, table ‘Total Reserves minus Gold’. The argument is that, in the absence of sufficiently large shocks, a currency that dominates the marketplace will not lose much ground to challengers. South Korea completes the top ten list with $420,983.76 million in total reserves, comprising $414,004.46 million in forex and $104.45 million in gold.

The economic upheaval caused by the pandemic and the war in Ukraine has renewed concerns about the downfall of the dollar as the leading reserve currency. As of July 2023, China has by far the most reported foreign currency reserves of any country, with more than $3 trillion. India, Russia, Saudi Arabia, Switzerland, and Taiwan also have large reserve holdings. The United States currently holds roughly $244 billion worth of assets in its pool of reserves, including $36 billion worth of foreign currencies. By buying and selling currencies on the open market, a central bank can influence the value of its country’s currency, which can provide stability and maintain investor confidence.