Reserve currency
MacroDefinition
A currency held in significant quantities by foreign governments and central banks for international trade and as a reserve asset. The US dollar is the dominant reserve currency (~60% of global FX reserves). Euro: ~20%. Yen, GBP, RMB: each ~3-5%.
Reserve status confers structural advantages: cheaper borrowing, "exorbitant privilege" of running chronic deficits without forced adjustment, sanctions power. The 2022 freezing of Russian reserves accelerated diversification away from USD by sanctions-vulnerable countries.
Reserve status confers structural advantages: cheaper borrowing, "exorbitant privilege" of running chronic deficits without forced adjustment, sanctions power. The 2022 freezing of Russian reserves accelerated diversification away from USD by sanctions-vulnerable countries.
Related tool
Open the global tool on Arsenal.finance →