Definition of reserve currency in English:
A strong currency widely used in international trade that a central bank is prepared to hold as part of its foreign exchange reserves.
- The dollar itself became an international reserve currency, which central banks were prepared to accept as payment in external dealings rather than insisting on payment in their own national currencies.
- The advantage for the United States in being an international reserve currency is that allows it to more easily run a trade deficit, as other countries are happy to hold dollars to finance its trade gap.
- This may change if the world's central bankers one day decide they have outgrown their preference for a single reserve currency.
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