20 nations with largest foreign exchange reserves

Foreign exchange reserves, often taken as a yardstick to gauge a country's financial strength, are the foreign currency deposits and bonds held by central banks or monetary authorities (it is the Reserve Bank in the case of India).

Forex reserves include a country's gold holdings and convertible foreign currencies held in its banks, including special drawing rights and exchange reserve balances, with the International Monetary Fund.

Large reserves of foreign currency allow a government to manipulate exchange rates -- to stabilise the foreign exchange rates to create a favourable economic environment.

Click NEXT to find out the top 20 nations with the largest foreign exchange reserves...

China (Rank 1)

The world's fastest growing economy, China saw its foreign-exchange reserves rise to a record $2.65 trillion by the end of September 2010.

According to People's Bank of China, currency holdings rose about $194 billion.

China's trade surplus and inflows of cash from foreign direct investment also drive up the reserves, which rose 16.5 percent by the end of September from a year earlier.

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Japan (Rank 2)

Japan's foreign-exchange reserves shot to a new record high of $1.110 trillion at the end of September 2010.

Reserves grew by $39.44 billion, up for a fourth straight month.

The previous all-time high was below $1.074 trillion, during November 2009.

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Russia (Rank 3)

Russia holds the world's third-largest reserves.

Russia's gold and foreign exchange reserves fell to $495.6 billion in the week to October 29 from $498.7 billion.

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Saudi Arabia (Rank 4)

The oil rich Saudi Arabian economy has forex reserves to the tune of $410.3 billion as of December 2009.

Saudi Arabia possesses 25 per cent of the world's proven petroleum reserves, ranks as the largest exporter of petroleum.

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Taiwan (Rank 5)

Taiwan's foreign exchange reserves rose for the 24th consecutive month in October to reach a record high of $383.84 billion.

The nation's foreign exchange reserves were up $3.33 billion at the end of October from a month earlier, according to the Central Bank of the Republic of China.

Taiwan's rapid economic growth in the decades after World War II has transformed one of the Four Asian Tigers.

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India (Rank 6)

The country's foreign exchange reserves breached the $300-billion mark for the first time since 2008 with an addition of $2.2-billion on the back of a healthy rise in foreign currency.

The rise to $300.21-billion puts India, which has attracted $35-billion of foreign fund flows in capital markets alone this fiscal, in a select group of countries.

India's foreign exchange reserves had earlier touched $300-billion in March 2008, before the setting-in of the global slowdown in September that year.

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South Korea (Rank 7)

South Korea's foreign reserves amounted to $293.35 billion, as of October 2010 scoring a new record high.

According to the Bank of Korea (BOK), the October reserves rose $3.57 billion from the $289.78 billion at the end of September.

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Brazil (Rank 8)

Brazilian foreign exchange reserves hit a high of $271.472 billion.

It is the highest figure ever recorded in the country.

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Hong Kong (Rank 9)

Hong Kong's forex reserves increased in October from the previous month.

The total official foreign currency reserve assets amounted to $267 billion in October, up from $266.1 billion in the previous month.

A year earlier, forex reserves totaled $240.1 billion.

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Switzerland (Rank 10)

Switzerland, one of the world's richest and most investment-friendly destinations has forex reserves to the tune of $249.5 billion as of August 2010.

Openness to global trade and investment has enabled Switzerland to become one of the world's most competitive and flexible economies.

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Singapore (Rank 11)

Singapore economy remains on track to achieve the overall growth forecast of 13 to 15 per cent for the whole of 2010.

As of October 2010, the island-nation's forex reserves stand at $221.39 billion.

Germany (Rank 12)

Germany 's forex reserves stood at $205.75 billion as of September 2010.

The country is the largest national economy in Europe and the fourth-largest by nominal GDP in the world.

Germany is the world's second largest exporter with $1.120 trillion exported in 2009.

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France (Rank 13)

France's foreign exchange reserves have declined by 4.37 per cent to $177.3 billion by the end of September 2010.

France has $102.3 billion in gold reserves, $54.6 billion in foreign currency and accounts receivable in the International Monetary Fund worth $20 billion.

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Thailand (Rank 14)

Thailand's foreign-exchange reserves rose 1.5 per cent to $157 billion in the week ended September 3, 2010.

Algeria (Rank 15)

Algeria's foreign exchange reserves reached $146 billion at the end of September, slightly higher than at the half-year stage.

Reserves stood at $144.3 billion at the end of June, up from $143.1 billion in December 2008.

Oil and gas sales abroad account for 97 per cent of Algeria's total exports.

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Italy (Rank 16)

The world's 8th largest exporter has foreign exchange reserves of $144.84 billion as of August 2010.

United States (Rank 17)

The US economy is the world's largest economy with forex reserves at $136.53 billion.

It is also the world's largest producer of manufactured goods and fourth-largest producer of agricultural products.

Mexico (Rank 18)

The economy of Mexico is the 13th largest in the world in nominal terms; and the 11th by purchasing power parity, according to the World Bank.

Mexico's forex reserves stand at $110.65 billion.

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Malaysia's gross international reserves reached $104.6 billion as on October 15, up from $100.7 billion as on September 30.

The foreign currency reserves increased to $94.1 billion from $90.3 billion in the previous period.

The gold reserves remained unchanged at 1.5 billion.

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Iran's foreign exchange reserves stand at $100 billion.

In February 2008, the forex reserves stood at $76.1 billion.