Reserve Currency

A currency that is used worldwide by governments and businesses is called a reserve currency. Governments will hold a large portion of their reserves in this currency. International trade in goods and commodities will be transacted based off this currency. For example, gold is traded in U.S. dollars around the world. The current reserve currency in the world is the U.S. dollar, although that may change over time. China has hopes that its currency, the yuan, will gain reserve status equal to or greater than the U.S. dollar. The U.S. dollar gained reserve currency status over the British pound following World War II.


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