Reserve Currency

a currency accumulated by the central bank of a country for making international payments. Usually, a convertible currency is used as the reserve.

In the late 1960’s and early 1970’s the US dollar, the British pound sterling, and the West German mark were the most widely used reserve currencies, accounting for more than half the international payments turnover of the capitalist countries. The French franc, the Japanese yen, the Dutch guilder, and the Swiss franc are far less extensively used as reserve currencies.

The use of a currency as a reserve currency depends on the extent of a country’s participation in the international division of labor and on its role in international trade. As a rule, a reserve currency is either a “trade currency” that accounts for a significant volume of the turnover in international trade or a currency that is associated with a country characterized by high economic potential (that is, a country that supplies the world market with a broad range of high-quality goods). The position of a currency on the international loan capital market is very important. For example, although the Swiss franc is not a trade currency, it is used as a reserve currency because Swiss banks, which have a high international reputation, offer tremendous possibilities for quickly mobilizing considerable monetary assets. Moreover, deposits in Swiss banks are considered a reliable investment of capital.

The choice of a country’s currency as a reserve currency is also related to the technical feasibility of making international payments and, in particular, to the presence in the country of a well-developed network of banking institutions with an international reputation. Thus, despite the substantial decline of Great Britain’s role in the world market and despite the drop in the value of the pound sterling, British currency is still used as a reserve currency because Great Britain has a worldwide network of banks (seeFOREIGN-EXCHANGE RESERVES).

O. M. SHELKOV

单词	reserve currency
释义	reserve currency reserve currency n. A currency kept in reserve by governments for the paying of international debts and management of the domestic exchange rate. reserve currency n (Economics) foreign currency that is acceptable as a medium of international payments and that is therefore held in reserve by many countries Translations Reserve Currency Reserve Currency a currency accumulated by the central bank of a country for making international payments. Usually, a convertible currency is used as the reserve. In the late 1960’s and early 1970’s the US dollar, the British pound sterling, and the West German mark were the most widely used reserve currencies, accounting for more than half the international payments turnover of the capitalist countries. The French franc, the Japanese yen, the Dutch guilder, and the Swiss franc are far less extensively used as reserve currencies. The use of a currency as a reserve currency depends on the extent of a country’s participation in the international division of labor and on its role in international trade. As a rule, a reserve currency is either a “trade currency” that accounts for a significant volume of the turnover in international trade or a currency that is associated with a country characterized by high economic potential (that is, a country that supplies the world market with a broad range of high-quality goods). The position of a currency on the international loan capital market is very important. For example, although the Swiss franc is not a trade currency, it is used as a reserve currency because Swiss banks, which have a high international reputation, offer tremendous possibilities for quickly mobilizing considerable monetary assets. Moreover, deposits in Swiss banks are considered a reliable investment of capital. The choice of a country’s currency as a reserve currency is also related to the technical feasibility of making international payments and, in particular, to the presence in the country of a well-developed network of banking institutions with an international reputation. Thus, despite the substantial decline of Great Britain’s role in the world market and despite the drop in the value of the pound sterling, British currency is still used as a reserve currency because Great Britain has a worldwide network of banks (seeFOREIGN-EXCHANGE RESERVES). O. M. SHELKOV Reserve currency Reserve currency A foreign currency held by a central bank or monetary authority for the purposes of exchange intervention and the settlement of intergovernmental claims. Reserve Currency A foreign currency held by a central bank or occasionally a major financial institution that may be used to settle international debts or transactions. A reserve may also be used to affect the exchange rate of the domestic currency. The most common reserve currency worldwide is the U.S. dollar, though the British pound, Japanese yen, and euro are also very common. See also: SDR.
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reserve currency