Reserves of foreign currency provide a small return in interest.

Gold and foreign currency reserves are increasing, implying appreciation of the ruble.

The Chinese have 2 trillion in hard currency reserves to back up their promise.

Since the amount of foreign reserves available to defend a weak currency (a currency in low demand) is limited, a currency crisis or devaluation could be the end result.

Indeed, in September alone, China s foreign currency reserves increased by almost 100 billion compared to August.

It has paid off its foreign debt and built up foreign currency reserves of 450 billion.

By contrast, less developed countries that borrow in foreign currencies may run out of currency reserves.

He built up enormous foreign currency reserves, which cushioned the blow of the 2008 global economic crisis.

Artificially low exchange rates, restrictions on capital flows, and excessively large currency reserves all create global imbalances.

To preserve its precious foreign currency reserves, Egypt needs the US and its allies to provide foodstuffs.

Their surpluses have turned into deficits, and their sovereign wealth funds and currency reserves have suffered major losses.

For central banks, holding reserves in the same currency as other central banks means holding the most liquid asset.

But there are some big differences between then and now. Most developing countries have accumulated massive foreign currency reserves.

Latin America will finish 2007 with a current account surplus and growing foreign currency reserves, insulating them from financial crisis.

Reserve Sterling is used as a reserve currency around the world and is currently ranked 3rd in value held as reserves.

Purpose Official international reserves assets allow a central bank to purchase the domestic currency, which is considered a liability for the central bank (since it prints the money or fiat currency as IOUs).

A reduced Chinese appetite for reserves would be reflected in an appreciation of its currency and a reduction in its trade surplus.

By plowing more than two thirds of its mammoth foreign currency reserves into US dollar denominated assets, China has gained significant political leverage.

Then, crisis erupted in May, when the country ran low on foreign currency reserves and traders could not purchase the dollars they needed.

This is a small sum relative to Russia s currency reserves, but plenty for the underdeveloped banking system, which experienced a severe credit squeeze.

On the contrary, accumulating reserves beyond a certain threshold carries a high opportunity cost and suggests the need to let the currency appreciate.

The world s currency reserves were held in a slightly lop sided way at the end of 1971, Germany had reserves worth 17.2 billion, and Japan s were worth 14.1 billion 14 and 11.5 of the world s total, respectively.

The difference, which banks offset through transactions in the inter bank currency market, has a significant impact on China s foreign exchange reserves, but is not equivalent to the net change in foreign exchange reserves during the same period.

Worse still, they have had to adopt strategies such as currency intervention and accumulation of foreign exchange reserves that export financial instability to others.

Merrill Lynch predicts that, as currency reserves climb in countries like China, state run investment funds will grow to 7.9 trillion, from 1.9 trillion now.

And they certainly don t want to be pressed to apologize for holding hostage over 800 billion in foreign currency reserves, acquired to resist yen appreciation.

To reduce the strain put on India's foreign reserves by gold smuggling caused by this external use of the rupee, a separate currency was created.

The country has plowed some of its oil money into increasing its contributions to the BEAC, and now reportedly provides 48 of CEMAC s foreign currency reserves.

Fortunately, a combination of flexible exchange rates, strong international reserves, better monetary regimes, and a shift away from foreign currency debt provides some measure of protection.

Consider first the claim that the dollar s status as a reserve currency protects it, because governments around the world need to hold dollars as foreign exchange reserves.

Japan, with a surplus of saving, a strong currency, massive foreign exchange reserves, and factories without domestic orders, should take the lead in providing this funding for infrastructure.

But, while government officials do not deny that sanctions worry them, they point to Iran s high foreign currency reserves and the Iranians creativity in coping with the effects.

The crisis reinforced the arbitrary powers of the state, as a large part of official currency reserves was spent to bail out and reacquire the first group s assets.

While emerging market countries public sector balance sheets are stronger than ever with low deficits and debt accompanied by large foreign currency reserves household and corporate leverage have risen.

After all, central banks seeking to accumulate foreign currency reserves will have alternatives to acquiring dollars, so foreigners won t give America so much rope with which to hang itself.

The Swiss franc has historically been considered a safe haven currency with virtually zero inflation and a legal requirement that a minimum of 40 be backed by gold reserves.

As a result of these efforts, the renminbi has emerged as the second most used currency in trade finance, overtaking the euro, and the fifth most used for international payments. Moreover, it is increasingly preferred in currency market transactions and official foreign exchange reserves.

This is only a start. Merrill Lynch predicts that, as currency reserves climb in countries like China, state run investment funds will grow to 7.9 trillion, from 1.9 trillion now.

And, as a provider of a reserve currency, China would not need to continue its own quest for reserves, which has been a major contributing factor to global financial instability.

China has recycled about 60 of these reserves back into dollar denominated US government securities, because it wants to limit any appreciation of the renminbi against the world s benchmark currency.

These countries need to allow greater exchange rate flexibility and currency appreciation to reduce their external surpluses and thus the need to accumulate huge foreign reserves in the first place.

Ten years after the common currency s introduction, the 16 member euro zone has the world s second most important currency, accounting for more than a quarter of all central banks foreign exchange reserves and having overtaken the dollar as the currency of choice for international bond issues.

Egypt is running low on cash before recent rescue loans, currency reserves covered less than three months of imports and Egyptians are hoarding fuel and foodstuffs in anticipation of future shortages.

In response, central banks may intervene in currency markets to prevent appreciation, at the cost of accumulating low yield foreign reserves and diverting themselves from their primary goal of price stability.

The political humiliation and economic frustration of dealing with IMF imperatives confirmed the central importance of maintaining large reserves, as an issue not just of currency stability, but also economic sovereignty.