Foreign reserves for crisis management

Release date
Vol. 68. No. 1. March 2005
Michael Gordon
Main file
This is the first of two articles detailing the Reserve Bank's recent review of its foreign exchange market intervention capabilities. This article deals with the review of the adequacy of foreign reserves that could be used to calm a disorderly foreign exchange market during times of stress. The Bank developed a framework for balancing the costs and benefits of holding reserves, and recommended an increase in the Bank's intervention capacity to around $7 billion.