Description: Reserve Currencies: Why are they important for an economy?, The dwindling importance of the dollar as the world's reserve currency | DW News, Why is the dollar so powerful? | CNBC Explains, Will The U.S. Dollar Collapse As a Reserve Currency? - History of World Currency Explained
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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.
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 Petrocurrency 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, the U.S. dollar's status as a reserve currency, by increasing in value, hurts U.S. exporters.
Reserve currencies come and go. International currencies in the past have included the Greek drachma , coined in the fifth century B.C., the Roman denari , the Byzantine solidus and Islamic dinar of the middle-ages, the Venetian ducato of the Renaissance, the seventeenth century Dutch guilder and, more recently, the British pound and U.S. dollar.