From the course: Economic Tips for Everyone

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Reserve currencies

Reserve currencies

From the course: Economic Tips for Everyone

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Reserve currencies

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- Although global currencies aren't backed by anything today, some country's central banks hold other currencies in reserve to facilitate trade and international transactions. The currencies most widely held across countries are designated as reserve currencies and the International Monetary Fund, the IMF, recognizes eight world reserve currencies. Central banks keep these currencies on hand in inventory to help facilitate international transactions. And from time to time, they might buy some of these elite reserve currencies to boost the value or the perceived market value of their own currency. Other times, though, they might want to sell some of the reserve currencies they have on hand in order to weaken their currency, something that can boost their exports. Reserve currencies have this ability to strengthen other currencies or make other currencies weaken because they are the most liquid, valued and traded currencies…

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