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 ?
Then, we will have the beginning of a new era of international relations that will be the near end of the Dollar as the world reserve currency".
A reserve currency lasts no longer than foreign confidence in its holder's ability to pay its bills.
Another argument for having a global reserve currency is that foreign borrowing becomes cheaper.
"Since there is pressure on the dollar reserve, I think the move towards the Chinese yuan would be a positive step for both Pakistan and China," he added.He also said that Pakistan adopted yuan as a reserve currency under its financial management strategy.
Third, I trace the RMB's evolution as a reserve currency.
Only if and when paper dollars are demonetized will greenbacks cease being the reserve currency. The risk of demonetization of the dollar is very low.
Instead, the renminbi has gained no ground as a reserve currency and probably won't as long as China's financial markets remain largely closed, underdeveloped and subject to government meddling.
China's central bank has said that the yuan will gradually emerge as a reserve currency, according to Reuters.
The Chinese yuan officially joined the USD, the Euro, the Japanese Yen and the British Pound Sterling as a global reserve currency.
Critics argue that the move is largely symbolic and the yuan does not fully meet IMF reserve currency criteria of being freely usable, or widely used to settle trade or widely traded in financial markets.
Drawing on lessons learnt from the euro crisis, and consistent with Fitch's longstanding approach, those gaining most from euro adoption would be countries with weak external finances, as they would benefit from the reserve currency status of the euro, high level of loans in euros to the private and government sectors (or high "euroisation") which would benefit from the neutralisation of exchange rate risk on the economy, and a fixed exchange rate.

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