Science Fair Project Encyclopedia
Reserve currency
A reserve currency is a currency which is held in significant quantities by other governments and institutions as part of their foreign exchange reserves.
The United States Dollar is the most important reserve currency in the world today, followed by the Euro, the Japanese Yen, the Pound Sterling and the Swiss Franc. For this reason, the US dollar is said to have "reserve currency status", making it possible to run significant trade deficits with limited economic impact (see Balance of trade) as long as the major holders of reserve currencies do not issue public statements suggesting otherwise.
The G7 also frequently issues public statements as to exchange rates, though with the exception of Japan, the member states are impotent in their ability to directly affect rates.
See also
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