Foreign exchange reserves are bonds held by a country denominated in foreign currencies. Foreign exchange reserves are an important part of a country’s economic strength and are used to balance the balance of payments and stabilize exchange rates. We all know that my country is the largest foreign exchange reserve country in the world, and has purchased a large amount of US bonds. These valuable securities have become my country’s foreign exchange reserves, and the level of foreign debt is an important component of our foreign exchange transactions.
If a country’s foreign exchange reserves are in deficit, there is no doubt that this is a debt, which will inevitably cause changes in the market exchange rate. There are many countries in the world whose foreign debts are larger than their foreign exchange reserves, which will inevitably cause certain hidden dangers, such as in South America. Argentina, Brazil and other countries in the region. And the last Asian financial turmoil in 1998 was caused by the currency crisis in some regions and Southeast Asia.
It can be seen from international currency management that proper management of external debt will lead to exchange rate fluctuations. When the currency exchange rate is impacted, the result of this impact is often underestimated. If there is a “rescue” by the International Monetary Fund, the currency will depreciate sharply In addition to bearing the commercial conditions of an IMF loan, there is an additional burden of adjustment.
