A reserve currencyA reserve currency (also known as an "anchor currency") is ... More (also known as an “anchor currency”) is a foreign held in large quantities by and financial institutions (such as the International Monetary Fund (IMF) and World Bank) as an acceptable means of international payment.
How are reserve currencies used?
Reserve currencies enable a country to cover international and other obligations whilst reducing the risk associated with fluctuations. These fluctuations could cause unpredictable and costly changes in the level of international payments.
Reserve currencies can also be used to supportWhat are "support levels" in trading? A support level is a... More a nation’s own currencyWhat is currency? Currencies are the generally accepted medi... More. For example, the could use its foreign reserves to repurchase the .
What is the most widely used reserve currency?
At present, the primary world reserve currency is the and many , such as and silver, are priced accordingly in US dollars. This means that other nations closely monitor US to assess any impact on , because it would affect the value of their reserves.
What does the future look like for reserve currencies?
The US dollar may not always play such a central role and there is currently much debate around reserve currencies. The has been increasing in popularity and the has also been touted as a potentially key reserve currency for the future.
To find out more about the impact of external economics on currency, go to our module:
