Monetary Reserve

Monetary Reserve

The foreign currencies and precious metals that a central bank holds. A central bank's monetary reserve allows it to regulate its own currency; that is, a central bank with a large amount of reserves in euros is likely to closely follow or even peg its currency to the euro. On the other hand, central banks that keep monetary reserves in multiple currencies are more likely to follow either a basket peg or to have a floating currency. A monetary reserve is also called a currency reserve.

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Monetary reserve. A government's monetary reserve includes the foreign currency and precious metals that its central bank holds. That reserve enables the government to influence foreign exchange rates and to manage its transactions in the international marketplace.

For example, a country with a large reserve of US dollars is in a position to make significant investments in US markets.