Reserve Currency

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A Reserve Currency is a currency that is held by organizations as part of their foreign exchange reserves.



  • (Wikipedia, 2014) ⇒ Retrieved:2014-12-7.
    • A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves. The reserve currency is commonly used in international transactions and often considered a hard currency or safe-haven currency. People who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than people in other nations because they don't need to exchange their currency to do so. According to economists such as Valéry Giscard d'Estaing, a former French Minister of Finance and president, a reserve currency gets certain benefits called the exorbitant privilege. [1] The US dollar and the Euro make up 90% of allocated reserves globally. By the end of the 20th century the United States dollar was considered the world's most dominant reserve currency, and the world's need for dollars has allowed the United States government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year. However, by increasing the value of the dollar, its status as a reserve currency hurts U.S. exporters.[2]
  1. According to Pierre-Olivier Gourinchas, quoted in "Exorbitant Privilege", by Brad DeLong
  2. Financial Sense