Forex reserves or foreign exchange reserves (FX reserves) are assets that are held by a nation’s central bank or monetary authority. It is generally held in reserve currencies usually the US Dollar, and to a lesser degree the Euro, Japanese Yen and Pound Sterling. It is used to back its liabilities – like the native currency issued and also the reserves deposited by financial institutions or the government with the central bank.
In a conservative view, forex should only contain foreign bank notes, foreign treasury bills, foreign bank deposits, and long and short term foreign government securities. But, in practice, it also contains gold reserves, IMF reserve positions and SDRs or special drawing rights. The latter figure is more easily available and is officially known as the international reserves.