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Foreign Exchange Reserves

  Foreign exchange reserves are made up of foreign currencies and gold, and these resources are held by a country\'s central bank or treasury department. These reserves may be used to buy and sell the country\'s currency on foreign exchange markets the purpose being to affect that country\'s exchange rates. On occasions it may occur that, by agreement, several governments may enter exchange markets, at the same time in order to influence a particular country\'s exchange rates. An example of such a concerted action occurred near the end of the 1980s, when the central banks of several countries entered foreign exchange markets to sell dollars from their reserves to try to help the US prevent the value of the dollar from rising. Under the post-World War II gold standard countries were called upon to maintain stabilization funds to maintain the international value of their currency short of transferring gold. TF  



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