Under normal circumstances, the sources of foreign exchange reserves are trade surplus and capital inflow, which are concentrated in domestic central banks to form foreign exchange reserves. The specific forms are: short-term government deposits abroad or other means of payment that can be cashed abroad, such as foreign securities, checks, promissory notes, foreign currency drafts of foreign banks, etc. It is mainly used to pay off the balance of payments deficit. When a large number of domestic currencies are sold, foreign exchange reserves are used to buy domestic currencies to intervene in the foreign exchange market and maintain the exchange rate of domestic currencies.
principle
When managing and operating foreign exchange reserves, governments in various countries generally follow three principles: safety, liquidity and profitability.
Security means that foreign exchange reserves should be deposited in countries with political stability and strong economic strength and banks with high reputation, and always pay attention to the political and business trends of these countries and banks; We should choose currencies with low risk and relatively stable currency value, pay close attention to the balance of payments and economic situation of these currency issuing countries, predict the exchange rate trend, adjust the currency structure in time, and reduce the exchange rate and interest rate risks; We should also invest in safer credit instruments, such as national bonds with high reputation or institutional bonds guaranteed by the state.