<p>Typically foreign reserves will just be assets denominated in a foreign currency, most importantly government debt. Another popular reserve asset are IMF special drawing rights, which are convertible into currencies of member countries. I don't think there is any amount of physical cash currency in international reserves. You can see the makeup of US reserves here: <a href="https://www.treasury.gov/resource-center/data-chart-center/IR-Position/Pages/12302016.aspx" rel="nofollow noreferrer">https://www.treasury.gov/resource-center/data-chart-center/IR-Position/Pages/12302016.aspx</a></p>

<p>If the US treasury would decide to increase it's Yuan holdings, it will just buy bonds that pay are traded and denominated in Yuan.</p>

CC BY-SA 3.0
2017-01-30T20:05:28.910Z
2017-01-30T20:05:28.910Z
Tobias
<p>Assume that the United States decided to hold more yuan in the federal reserve. Which processes does that involve? I assume there is some sort of electronic exchange between the two central banks where dollars are exchanged for yuan. What happens physically? I assume that the Fed will only need to hold a portion (say, 10%) of the reserves as currency, and the other 90% will be just based on the credibility of the bank. Does that mean that the currency worth 10% of the exchange needs to be loaded in a special plane and flown from China to the US and vice versa? How often do those sorts of plane trips happen?</p>

CC BY-SA 3.0
2017-03-20T06:04:31.620Z
I just read in the news that on 7 March 2017, R200 million was being flown out of South Africa. The story didn't say why.
ahorn
<central-banking><federal-reserve><foreign-exchange><reserve-requirement-ratio>
What physically happens when foreign currency reserves change?
ahorn
# What physically happens when foreign currency reserves change?

(Asked by: username_0 on 2017-01-30)

Assume that the United States decided to hold more yuan in the federal reserve. Which processes does that involve? I assume there is some sort of electronic exchange between the two central banks where dollars are exchanged for yuan. What happens physically? I assume that the Fed will only need to hold a portion (say, 10%) of the reserves as currency, and the other 90% will be just based on the credibility of the bank. Does that mean that the currency worth 10% of the exchange needs to be loaded in a special plane and flown from China to the US and vice versa? How often do those sorts of plane trips happen?

**Tags:** central-banking, federal-reserve, foreign-exchange, reserve-requirement-ratio

> **Comments:**
> **username_0**: I just read in the news that on 7 March 2017, R200 million was being flown out of South Africa. The story didn't say why.  

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## 1 answers

### Answer by username_1 on 2017-01-30. Score: 2

Typically foreign reserves will just be assets denominated in a foreign currency, most importantly government debt. Another popular reserve asset are IMF special drawing rights, which are convertible into currencies of member countries. I don't think there is any amount of physical cash currency in international reserves. You can see the makeup of US reserves here: <https://www.treasury.gov/resource-center/data-chart-center/IR-Position/Pages/12302016.aspx>

If the US treasury would decide to increase it's Yuan holdings, it will just buy bonds that pay are traded and denominated in Yuan.


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