Reserve currency

A reserve currency is one that is used in large quantities by many governments and institutions as part of its international reserves. the investment manager and financial analyst They also tend to be the currency through which sets prices for goods traded in the global market such as oil, gold, etcetera. More recently some countries, especially in Asia, have been accumulating huge reserves to strengthen the competitiveness of its exporters by not allowing the appreciation of local currency. So do in order to contain large and rapid inflows of capital to absorb large and financial crises as the Asian financial crisis.
This allows the country to purchase products at rates marginally cheaper than other nations, they have to change their currency with each purchase, incurring some transaction costs (for major Ribostky currencies, this transaction cost is negligible with respect the price of the product). It also allows the government issuing currency to funds borrow a better rate because there will always be a bigger market for that currency than others.
Accumulation of international reserve currencies
The U.S. dollar is the most important reserve currency today mainly due to the legacy of the Bretton Woods system. Throughout the last decade citation needed , over 50 of the total international reserves were in dollars. For this reason, it is considered that the U.S. dollar has the status of reserve currency, allowing the United States have The higher trade deficits (financed by the Senoraje) with limited economic impact, provided that the largest foreign holders of dollars continues to accrue.
The Euro is now the second most commonly used currency in international reserves, with a share of approximately 27 , partly thanks to one of its predecessors, the German mark. After the Second World War and the rebuilding of the German economy, the Deutsche Mark has earned the status of second most important reserve currency after the U.S. dollar due to the high credibility of the Bundesbank win thanks to its guaranteed independence from the government (of Indeed, the ECB is directly modeled on the Bundesbank). When the Euro was introduced in 1999, replacing Marco and other European currencies, largely inherited the status of reserve currency of the Framework. Since investment portfolio then its contribution to official reserves has risen continually since banks (China, Russia) want to diversify their reserves and because the NYSE trade in the investors eurozone continues to expand.
The pound was the main reserve currency for most part of the nineteenth and twentieth centuries (although during this period the main property used as a reserve but were not foreign gold coins). But a continuing deficit in the current account and fiscal balance in the government, financed by family of funds cheap credit, monetary and fiscal policies unsustainable and a relative decline of Britain as economic and military power, implying that just lost its status Libra . In mid-2006 was the third most used as a reserve currency, having seen a resurgence in popularity in recent years .
The Japanese Yen was considered the third most important reserve currency for several decades between the mid and late nineteenth century, but recently has come about due to declining interest rates have remained at zero for stocks years because of the danger of deflation in Japan and the economic crisis suffered by the country, it has been overtaken by the pound.
The Swiss Franc is always named as fund management a reserve currency due to their historical stability (especially important after the implementation of the Bretton Woods investment management system), although the portion of reserves held in Swiss francswas typically kept around or even below 0.3 .
Other nations and groups of nations have expressed their wishes that their currencies (or future currencies) be used as reserve hedge funds currencies, such as Russia, and the Cooperation Council for the Arab Gulf.
The G8 expressed publicly on exchange rates, although with the exception of Japan, member states are unable to directly affect the rates. The and its fund management experts, headed by While in the past, organizations predecessors could directly manipulate exchange rates to alleviate large trade deficits (see investment Plaza Accord)
The most important reserve currency is generally selected by the banking community for the depth, strength and stability of the economy where it is used.