US Outranked by China, 36th in World for Forex Reserves

In the midst of a global landscape characterized by mounting geopolitical tensions, inflationary pressures, and various economic challenges, foreign currency reserves play a crucial role in safeguarding a nation's economic stability.

Foreign exchange reserves are essentially the cash and other reserve assets such as gold, bank deposits, and government securities held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets.

With the significance and importance of maintaining healthy foreign exchange reserves more important than ever, FOREX.com sought to uncover the countries with the largest foreign exchange reserves to determine financial stability and prowess. The forex trading platform commissioned an analysis of the foreign exchange reserves held by 94 countries between Q1 2019 - Q2 2023 to identify which country has the largest forex reserves.

It turns out that the People's Republic of China (PRC) had the highest foreign exchange reserves in Q2 2023, at $3.1 trillion USD ($3,192,998,000,000). The US ranked far below at position 36 in the world for forex reserves.

 

Key findings:

• The People's Republic of China (PRC) had the highest foreign exchange reserves in Q2 2023, at $3.1 trillionUSD ($3,192,998,000,000)
• China shows the lowest volatility (standard deviation) in terms of the rate of change, experiencing the lowest maximum decrease of approximately -4.12%
• Forex reserves in Japan outranked the Republic of Korea (ROK) by almost two-thirds (64%) in Q2 2023
• Switzerland shows the highest volatility in terms of the rate of change, experiencing the highest maximum increase of approximately 13.26%
• USA ranks 36th in the world for foreign exchange reserves

 

The results:

 

1. The People's Republic of China (PRC) held $3.19 trillion USD in forex reserves

 

In Q2 2023, the People's Republic of China (PRC) held the largest foreign exchange reserves of all countries analyzed, with more than $3.19 trillion USD ($3,192,998,000,000). This is almost triple the forex reserves held by Japan in Q2 2023, at $1.12 trillion USD ($1,120,152,000,000).

 

2. USA ranks 36th in the world for foreign exchange reserves

 

Ranking 36th is the United States of America, with $35.7 billion USD held in foreign exchange reserves in Q2 2023 ($35,792,000,000). This is a similar level as what is held in Germany and Chile, but is over two-thirds less than the forex reserves held by the United Kingdom in the same period, at $109 billion ($109,007,000,000).

Interestingly, the Hong Kong Special Administrative Region (HKSAR) held a significantly smaller level of foreign exchange reserves ($400,522,000,000), which is 87% less than the People's Republic of China.

As well as this, China shows the lowest volatility (standard deviation) in terms of the rate of change, experiencing the lowest maximum decrease of approximately -4.12%.

Wang Chunying, a spokesperson from the forex administration, said that coronavirus flare-ups and expectations of monetary policy shift in some major countries has caused the US dollar index to fall, which has resulted in the "valuation rise"of non-US dollar currencies and contributed to the upward trend of China's foreign exchange reserves.

 

3. Japan outranked ROK by almost two-thirds in foreign exchange reserves

 

Japan ranks second with $1.12 trillion USD held in forex reserves ($1,120,152,000,000) in Q2 2023. In comparison Japan outranked the Republic of Korea (ROK) by almost two-thirds, with the eighth-place country holding $39.6 billion USD in the same period ($396,155,000,000). The study reveals that Japan had its reserves above the mean 11 times and below the mean 6 times.

It’s reported by ministry officials that interest earned on foreign bold holdings, declines in overseas yields, appreciation of the euro against the dollar, and higher gold prices are the metrics that drove up Japan’s foreign exchange reserves.

 

4. Switzerland has the highest forex reserves volatility (standard deviation)

 

Ranking third is Switzerland, with $80.9 billion USD held in foreign exchange reserves in Q2 2023 ($809,213,980,000). This is almost triple the forex reserves held by the Euro Area in the same period, at $29.2 billion USD ($292,091,120,000). The Swiss National Bank (SNB) utilized FX interventions to challenge the eurozone debt crisis and the COVID-19 pandemic, which increased appreciation pressures on the Swiss franc.³

Switzerland has the highest volatility (standard deviation), followed by Japan and China. This suggests that these countries experience larger fluctuationsin their reserves, which could be due to a variety of factors like economic conditions, trade balances, or monetary policy changes.

As well as this, Switzerland shows the highest volatility in terms of the rate of change, experiencing the highest maximum increase of approximately 13.26%.

 

Countries’ Forex Reserves

Rank

Country

Volatility (Standard Deviation - Millions)

Forex Reserves

Q1 2023 (USD)

Forex Reserves

Q2 2023 (USD)

1.

China, P.R: Mainland

62,502.41

3,183,872,000,000

3,192,998,000,000

2.

Japan

74,498.27

1,128,749,000,000

1,120,152,000,000

3.

Switzerland

96,238.57

813,897,170,000

809,213,980,000

4.

India

56,670.20

509,691,300,000

527,978,590,000

5.

Saudi Arabia

25,426.10

413,320,420,000

417,924,350,000

6.

Russian Federation

29,054.59

417,859,400,000

410,779,300,000

7.

China, P.R: Hong Kong

18,075.62

413,347,000,000

400,522,000,000

8.

Republic of Korea

19,447.07

400,570,000,000

396,155,000,000

9.

Singapore

50,380.75

298,647,300,000

316,692,000,000

10.

Brazil

26,918.28

283,699,150,000

291,512,600,000

 

36.

United States

N/A

36,747,000,000

35,792,000,000