Try our Pocket-Friendly Plans
Try Our Exclusive Services
Download the App 
Dashboard
Profile
Inquiries
Buy Leads
My Active Services
Login
I have read and heard people writing and talking about why nations need Foreign Exchange Reserves. Can anyone throw some light on this subject?
Money Management Consultants Ltd
New Delhi, India
Free Member, Joined :05/11/2007
No of Topics Posted : 113
Reply/Comments : 14
Reserves are defined as external assets that are readily available to and controlled by monetary authorities for direct financing of external payments imbalances. Nations need reserves for the following purposes:
(a) Maintain confidence in the market and provide the support to the nations domestic currency and exchange rates. The nation should be in a position to intervene and support the domestic currency as and when required.
(b) Reserves help in protecting and minimizing the nations external vulnerability to the shocks during the crisis situations and also are able to support the nation in times of increased cost in borrowings.
(c) Should be able to create confidence in the market regarding the country's ability to meet the external payment obligations.
(d) Back the domestic currency with external assets.
(e) Help the nation in meeting its foreign exchange needs and external debt obligations.
(f) Maintain reserves for national disasters and external calamities.
Free Member, Joined :02/02/2007
No of Topics Posted : 122
Reply/Comments : 16
Tradeindia.com. We have assigned moderators to facilitate these discussions.
