Reserve Currency

A reserve currency is a type of currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves. These currencies are widely accepted for international trade and investment, providing stability and liquidity. The U.S. dollar is the most common reserve currency, followed by the euro, Japanese yen, and British pound. Countries hold reserve currencies to facilitate trade, maintain value, and manage exchange rate stability. This helps them respond to economic challenges and act as a safeguard against financial uncertainty.