The amount in assets kept in case of urgent need for liquidity. For central banks, reserves are the total amount in assets held by the bank in order to guarantee the authority's solvency and ability to conduct open market operations. Such reserves can indeed hold considerable sway over financial markets, as the largest central bank reserves in the world maintain trillions of dollars in assets. Of particular note to foreign exchange markets, these assets most often include other foreign currencies and government debt. |
Perhaps the most well-known and closely followed central bank reserves are those in Japan and China. With the world's 1st and 2nd ranked reserves by total assets, these Asian central banks wield great influence over currency and bond price movements.