Reserve Currency

In general, reserve currencies are completely exchangeable currencies widely utilized in the global monetary system because they comprise most of the reserves kept by governments and are also often employed in current accounts and financial transactions. Due to the more extensive markets for these currencies, reserve currencies frequently have liabilities held by nations other than the issuer. Conversely, one of the attributes of a reserve currency issuer is its liberation from actual sin. A reserve currency is a substantial sum of money retained by central banks and other important financial institutions to influence transactions, investments, and responsibilities under international debt agreements and take advantage of their local exchange rate.