Smart things you should know about RBI's forex reserves

1. Forex reserve is the money or assets that are held by the central bank in foreign currency.
2.Forex reserves include currency, bank notes, deposits, bonds, t-bills and other government securities held in another currency.
3. Reserves are typically held in one or more reserve currency, mostly the US dollar, and to a lesser extent the Euro, the British pound sterling, and the Japanese yen.
4. It allows the central bank to back and purchase the domestic currency, which is considered a liability for the central bank as it prints the currency.
5. Forex reserves are used as a tool of monetary policy. The central bank influences the exchange value of the domestic currency by buying and selling foreign currency.

Content courtesy: Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

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