Knowra Reserve currency Reserve currency A currency held by central banks and governments for international payments, foreign-exchange intervention, and financial reserves. Its widespread use supports trade and borrowing beyond its issuing country.
Foreign-exchange reserves : Assets held by monetary authorities to support a currency, meet external obligations, and respond to financial stress. Reserve currencies make up much of the foreign-currency portion of these official assets.
Gold standard : A monetary system in which a currency’s value is fixed to a specified quantity of gold. Gold served as an international reserve asset before modern fiat currencies became dominant.
US dollar : The official currency of the United States and the leading currency in international reserves, trade, and finance. It is the dominant contemporary example of a reserve currency.
Reserve asset : An asset held by monetary authorities to meet balance-of-payments needs and support confidence in a country’s finances. A reserve currency is one type of reserve asset, alongside gold and other claims.
Triffin dilemma : The conflict between supplying global liquidity through a national currency and maintaining confidence in that currency’s value. It captures a tension built into a system reliant on one country’s currency for global reserves.
Foreign-exchange intervention : A central bank’s purchase or sale of currencies to influence exchange rates or market conditions. Authorities can use reserve-currency assets to intervene in currency markets.
Pound sterling : The currency of the United Kingdom, historically a leading currency in international trade and finance. Sterling was the principal international currency before the US dollar’s ascendancy.
Euro : The common currency used by most European Union member states and a major international reserve currency. It is the largest alternative to the dollar in official reserves.
Key currency : A currency used extensively in international trade, finance, and exchange-rate management. The term overlaps with reserve currency but can emphasize private-market use.
De-dollarization : The reduction of reliance on the US dollar in reserves, trade, and international finance. It describes efforts to diversify away from the dominant reserve currency.
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