Reserve currency

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Reserve currency

A foreign currency held by a central bank or monetary authority for the purposes of exchange intervention and the settlement of intergovernmental claims.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Reserve Currency

A foreign currency held by a central bank or occasionally a major financial institution that may be used to settle international debts or transactions. A reserve may also be used to affect the exchange rate of the domestic currency. The most common reserve currency worldwide is the U.S. dollar, though the British pound, Japanese yen, and euro are also very common. See also: SDR.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Economists claim that the yuan is apparently becoming one of the world's major reserve currencies, such as the US dollar or the euro."The 21st century will belong to China, it will soon become the world's largest economy and thus it's a logical step for the Bundesbank and the ECB to include the yuan in their forex reserves within their diversification strategies," said JandT Banka analyst Stanislav Panis, as cited by TASR.
The HSBC executive said that the inclusion of the RMB in the International Monetary Fund (IMF)'s special drawing rights (SDR) inclusion had now catapulted it into the ranks of the world's most important reserve currencies. He said this would give greater confidence to companies and institutions around the world to settle trade in renminbi and invest in RMB-denominated assets.
The International Monetary Fund has designated four currencies as reserve currencies available for stabilizing monetary markets: the US dollar, the Japanese yen, the euro and the British pound.
China's central bank has adopted stricter reporting rules as part of its push to have the yuan added to the International Monetary Fund's basket of reserve currencies at its next review, Bloomberg added.
The International Monetary Fund has said there will be no quick decision as to whether it may include the Chinese yuan in its strategic basket of reserve currencies. The renminbi struggles to meet key financial norms.
The point is that the secondary reserve currencies will continue to be secondary, in the sense that an incompatibility of payments objectives will still be resolved at the expense of the United States, by a dollar appreciation, since the United States is the only country that exhibits an elastic supply of credits.
He believes that the world is heading to a state where there are several reserve currencies, notably the euro and the Chinese renminbi.
The central bank on Monday called for inclusion of emerging market currencies as alternative reserve currencies to the dollar.
The intriguing, but unanswered, question is: what currencies are now replacing the dollar, the euro, and the other traditional reserve currencies in these portfolios?
"Reserve currencies come and go, but there is no obvious one to replace the dollar yet.
We believe this is a great opportunity for anyone who earns income from or holds wealth in any of the main reserve currencies," Robinson said.

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