Foreign currency reserves are assets held by a country's central bank in foreign currencies. These reserves are used to manage the value of the national currency, facilitate international trade, and provide a buffer against economic shocks. They can include cash, bank deposits, bonds, and other financial instruments in currencies like the U.S. dollar, euro, or Japanese yen. Countries maintain these reserves to ensure they can meet international payment obligations and stabilize their economy. A higher level of foreign currency reserves can enhance a nation's creditworthiness and help it respond to financial crises, making them a crucial part of economic policy.