Currency
Mapped: The Countries With the Most Foreign Currency Reserves
The Countries With the Most Foreign Currency Reserves
In the high stakes game of international trade, holding onto a stockpile of foreign cash gives you options.
Forex reserves can help buoy the local currency or even provide much-needed insurance in the case of a national economic emergency. And when reserves are plentiful, a country can even use them to wield influence on international affairs – after all, most financial assets are simultaneously someone else’s liability.
Forex Reserves by Country
Today’s infographic comes to us from HowMuch.net, and it resizes countries on a world map based on their foreign currency reserves, according to the most recent IMF data.
Here is a list of the top 10 countries – China tops the list with a solid $3.2 trillion in reserves held:
Rank | Country | Forex Reserves ($B) |
---|---|---|
#1 | China | $3,161.5 |
#2 | Japan | $1,204.7 |
#3 | Switzerland | $785.7 |
#4 | Saudi Arabia | $486.6 |
#5 | Hong Kong (China) | $437.5 |
#6 | India | $397.2 |
#7 | South Korea | $385.3 |
#8 | Brazil | $358.3 |
#9 | Russia | $356.5 |
#10 | Singapore | $279.8 |
The first thing you may gather from this list is that major economies like the U.S. and Europe are noticeably absent, but that is because the U.S. dollar and the euro are the most common reserve currencies used in international transactions. As a result, countries such as the United States do not need to hold as many reserves.
To put this all into context, here is what central banks reported in 2017 Q3 for their foreign currency holdings:
Rank | Reserve Currency | Global Holdings |
---|---|---|
#1 | U.S. Dollar | 63.5% |
#2 | Euro | 20.0% |
#3 | Japanese Yen | 4.5% |
#4 | British Pound | 4.5% |
#5 | Canadian Dollar | 2.0% |
#6 | Aussie Dollar | 1.8% |
#7 | Chinese Yuan | 1.1% |
n/a | Other | 2.6% |
Interestingly, the Japanese yen has decent acceptance as a reserve currency, but the country still holds the second highest amount of foreign currency reserves ($1.2 trillion) anyways. This is partially because Japan is an export powerhouse, sending $605 billion of exports abroad every year.
Why Hold Foreign Currency Reserves?
And now, a practical question: why do these countries hold foreign currency reserves in the first place?
Here are seven reasons, as originally noted by The Balance:
- Forex reserves allow a country to maintain the value of their domestic currency at a fixed rate
- Countries with floating exchange rates can buy up foreign currencies or financial instruments to reduce the value of their domestic currency
- Forex reserves can help maintain liquidity during an economic crisis
- Reserves can provide confidence to foreign investors, showing that the central bank has the ability to take action to protect their investments
- Foreign currency reserves give a country extra insurance in meeting external payment obligations
- Forex reserves can be used to fund certain sectors, like building infrastructure
- They also provide a means of diversification, which allows central banks to reduce the risk of their overall portfolios
For a related animation, see the history of how the U.S. dollar spread across the world.
Money
Visualizing $65 Trillion in Hidden Dollar Debt
Since 2008, the value of unrecorded dollar debt has doubled. Here’s why this is increasing risk in global financial markets.

Visualizing $65 Trillion in Hidden Dollar Debt
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The scale of hidden dollar debt around the world is huge.
No less than $65 trillion in unrecorded dollar debt circulates across the global financial system in non-U.S. banks and shadow banks. To put in perspective, global GDP sits at $104 trillion.
This dollar debt is in the form of foreign-exchange swaps, which have exploded over the last decade due to years of monetary easing and ultra-low interest rates, as investors searched for higher yields. Today, unrecorded debt from these foreign-exchange swaps is worth more than double the dollar debt officially recorded on balance sheets across these institutions.
Based on analysis from the Bank of International Settlements (BIS), the above infographic charts the rise in hidden dollar debt across non-U.S. financial institutions and examines the wider implications of its growth.
Dollar Debt: A Beginners Guide
To start, we will briefly look at the role of foreign-exchange (forex) swaps in the global economy. The forex market is the largest in the world by a long stretch, with trillions traded daily.
Some of the key players that use foreign-exchange swaps are:
- Corporations
- Financial institutions
- Central banks
To understand forex swaps is to look at the role of currency risk. As we have seen in 2022, the U.S. dollar has been on a tear. When this happens, it hurts company earnings that generate revenue across borders. That’s because they earn revenue in foreign currencies (which have likely declined in value against the dollar) but end up converting earnings to U.S. dollars.
In order to reduce currency risk, market participants will buy forex swaps. Here, two parties agree to exchange one currency for another. In short, this helps protect the company from unfavorable foreign exchange rates.
What’s more, due to accounting rules, forex swaps are often unrecorded on balance sheets, and as a result are quite opaque.
A Mountain of Debt
Since 2008, the value of this opaque, unrecorded dollar debt has nearly doubled.
Date | Non-U.S. Bank Unrecorded Debt | Non-U.S. Shadow Bank Unrecorded Debt |
---|---|---|
2022* | $39.4T | $26.0T |
2021 | $37.1T | $25.0T |
2020 | $34.5T | $22.9T |
2019 | $32.9T | $21.5T |
2018 | $32.4T | $20.1T |
2017 | $31.2T | $18.8T |
2016 | $27.9T | $17.0T |
2015 | $25.1T | $15.6T |
2014 | $30.0T | $17.0T |
2013 | $30.8T | $15.7T |
2012 | $28.9T | $15.9T |
2011 | $27.5T | $14.7T |
2010 | $24.8T | $15.0T |
2009 | $21.4T | $12.1T |
2008 | $21.9T | $12.4T |
*As of June 30, 2022
Driving its rise in part was an era of rock-bottom interest rates globally. As investors sought out higher returns, they took on greater leverage—and forex swaps are one example of this.
Now, as interest rates have been rising, forex swaps have increased amid higher market volatility as investors look to hedge currency risk. This appears in both non-U.S. banks and non-U.S. shadow banks, which are unregulated financial intermediaries.
Overall, the value of unrecorded debt is staggering. An estimated $39 trillion is held by non-U.S. banks along with $26 trillion in overseas shadow banks around the world.
Past Case Studies
Why does the massive growth in dollar debt present risks?
During the market crashes of 2008 and 2020, forex swaps faced a funding squeeze. To borrow U.S. dollars, market participants had to pay high rates. A lot of this hinged on the impact of extreme volatility on these swaps, putting pressure on funding rates.
Here are two examples of how volatility can heighten risk in the forex market:
- Exchange-rate volatility: Sharp swings in USD can spur a liquidity crunch
- U.S. interest-rate volatility: Sudden rate fluctuations can mean much higher costs for these trades
In both cases, the U.S. central bank had to step in to provide liquidity in the market and prevent dollar shortages. This was done through pumping cash into the system and creating swap lines with other non-U.S. banks such as the Bank of Canada or the Bank of Japan. These were designed to protect from declining currency values and a liquidity crunch.
Dollar Debt: The Wider Implications
The risk from growing dollar debt and these swap lines arises when a non-U.S. bank or shadow bank may not be able to hold up their end of the agreement. In fact, on a daily basis, there is an estimated $2.2 trillion in forex swaps exposed to settlement risk.
Given its vast scale, this dollar debt could have greater systemic spillover effects. If participants fail to pay it could undermine financial market stability. Because demand for U.S. dollars increases during market uncertainty, a worsening economic climate could potentially expose the forex market to more vulnerabilities.
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