Foreign exchange reserves are assets held by a country's central bank in foreign currencies. These reserves are used to manage the country's currency value, facilitate international trade, and ensure financial stability. They typically include foreign currencies, gold, and special drawing rights from the International Monetary Fund. Countries maintain foreign exchange reserves to protect against economic shocks and to support their own currency in the global market. A higher level of reserves can enhance investor confidence and provide a buffer during financial crises, allowing governments to intervene if necessary to stabilize their economy.