The Foreign Exchange Reserves (FOREX) of India has crossed $400 Billion mark in 2017 as the effect of sharp rising of foreign currency assets.
The rank of India is 6th in the Forex Reserves Ranking.
China, Japan, Switzerland, Saudi Arabia and Taiwan are respectively in the 1st, 2nd, 3rd, 4th and 5th position in the Forex Reserves Ranking.
The Forex Reserves are used by the countries in the time of emergency need i.e. long and short term payment obligations including commercial and sovereign debts at international level, intervention in Foreign Currency Market during volatile period, import financing etc.
Apart from that, these reserves also help to gain the confidence of international market in case of handling the unexpected external issues.
The Forex Reserves are the Foreign Currency Reserve of the Central Bank and Government Organization of one country.
The Forex Reserves are the reserves those are held in foreign currencies or equivalent.
The Foreign Currencies come from the exports, grants, foreign loans and foreign investments in one country.
The Forex Reserves are used to pay the international duties and loans and provide the international grants to other countries.
If the reserves of a country become low, the IMF (International Monetary Fund) or World Bank help the country.
If one country has strong Forex position, it can affect the global trade relations and exchange rate.
Reserve Bank of India manages the Forex Reserves of India.
The Forex Reserves of India are mostly used to purchase the oil imports.
The Forex Reserves of India consists of gold, foreign currency asset and Special Drawing Rights allocated by the IMF.
The Foreign Currency Asset has the highest rating of credit and does not pose any kind of credit risk.
The asset includes treasury bills, sovereign bonds and short term deposits besides the cash accounts in the top rated global banks.
The Special Drawing Rights (SDR) is the “interest-bearing” assets those are created by IMF in the year of 1969. The SDR is created to provide supplement to the reserve assets of member countries.
The SDR is based on the international currencies comprised of US Dollar, Japanese Yen, Pound Sterling, Euro.
The SDR is the potential claim on the usable currencies of the member countries of the IMF.
The Forex Market operates 24 hours in 5 days of a week to work as per as the different time zones of different countries.
The Forex Market (Currency Market) is regarded as the largest market of the world in which currencies across the world are traded.
Anyone from any international financial organizations, companies can trade in Forex market.
The market can work on the “Over the Counter” principle where one has to pay for the currencies he has asked for.
The rates of the foreign currencies vary everyday and the exchange rates are diffident for different countries.
The exchange rates are determined on the basis of several factors i.e. level of economic activity of one country, GDP, political condition of the country, share market related activities etc.
Generally the investors and traders put the money on a particular currency based on these factors.
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