A reserve currency is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international transactions, international investments and all aspects of the global economy. It is often considered a hard currency or safe-haven currency.
The United Kingdom's pound sterling was the primary reserve currency of much of the world in the 19th century and first half of the 20th century. [1] However, by the middle of the 20th century, the United States dollar had become the world's dominant reserve currency. [2] [ better source needed ]
Reserve currencies have come and gone with the evolution of the world’s geopolitical order. International currencies in the past have (excluding those discussed below) included the Greek drachma, coined in the fifth century B.C.E., the Roman denarii, the Byzantine solidus and Islamic dinar of the middle-ages and the French franc.
The Venetian ducat and the Florentine florin became the gold-based currency of choice between Europe and the Arab world from the 13th to 16th centuries, since gold was easier than silver to mint in standard sizes and transport over long distances. It was the Spanish silver dollar, however, which created the first true global reserve currency recognized in Europe, Asia and the Americas from the 16th to 19th centuries due to abundant silver supplies from Spanish America. [3]
While the Dutch guilder was a reserve currency of somewhat lesser scope, used between Europe and the territories of the Dutch colonial empire from the 17th to 18th centuries, it was also a silver standard currency fed with the output of Spanish-American mines flowing through the Spanish Netherlands. The Dutch, through the Amsterdam Wisselbank (the Bank of Amsterdam), were also the first to establish a reserve currency whose monetary unit was stabilized using practices familiar to modern central banking (as opposed to the Spanish dollar stabilized through American mine output and Spanish fiat) and which can be considered as the precursor to modern-day monetary policy. [4] [5]
It was therefore the Dutch which served as the model for bank money and reserve currencies stabilized by central banks, with the establishment of Bank of England in 1694 and the Bank of France in the 18th century. The British pound sterling, in particular, was poised to dislodge the Spanish dollar's hegemony as the rest of the world transitioned to the gold standard in the last quarter of the 19th century. At that point, the UK was the primary exporter of manufactured goods and services, and over 60% of world trade was invoiced in pounds sterling. British banks were also expanding overseas; London was the world centre for insurance and commodity markets and British capital was the leading source of foreign investment around the world; sterling soon became the standard currency used for international commercial transactions. [6] On continental Europe, the bimetallic standard of the French franc remained the unifying currency of several European countries and their colonies under the Latin Monetary Union, which was established in 1865. Peru, Colombia and Venezuela also adopted the system in the 1860s and 1870s. [7]
Attempts were made in the interwar period to restore the gold standard. The British Gold Standard Act reintroduced the gold bullion standard in 1925, [8] followed by many other countries. This led to relative stability, followed by deflation, but because the onset of the Great Depression and other factors, global trade greatly declined and the gold standard fell. Speculative attacks on the pound forced Britain entirely off the gold standard in 1931. [9] [10]
After World War II, the international financial system was governed by a formal agreement, the Bretton Woods system. Under this system, the United States dollar (USD) was placed deliberately as the anchor of the system, with the US government guaranteeing other central banks that they could sell their US dollar reserves at a fixed rate for gold. [11]
In the late 1960s and early 1970s, the system suffered setbacks ostensibly due to problems pointed out by the Triffin dilemma—the conflict of economic interests that arises between short-term domestic objectives and long-term international objectives when a national currency also serves as a world reserve currency.
Additionally, in 1971 President Richard Nixon suspended the convertibility of the USD to gold, thus creating a fully fiat global reserve currency system. However, gold has persisted as a significant reserve asset since the collapse of the classical gold standard. [12]
Following the 2020 economic recession, the IMF opined about the emergence of "A New Bretton Woods Moment" which could imply the need for a new global reserve currency system. (see below: § Calls for an alternative reserve currency) [13]
The IMF publishes the aggregated Currency Composition of Foreign Exchange Reserves (COFER) each quarter. [14] The reserves of the individual reporting countries and institutions are confidential. [15] Thus the following table is a limited view about the global currency reserves that only deals with allocated (i.e. reported) reserves:
2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1995 | 1990 | 1985 | 1980 | 1975 | 1970 | 1965 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
US dollar | 58.41% | 58.52% | 58.80% | 58.92% | 60.75% | 61.76% | 62.73% | 65.36% | 65.73% | 65.14% | 61.24% | 61.47% | 62.59% | 62.14% | 62.05% | 63.77% | 63.87% | 65.04% | 66.51% | 65.51% | 65.45% | 66.50% | 71.51% | 71.13% | 58.96% | 47.14% | 56.66% | 57.88% | 84.61% | 84.85% | 72.93% |
Euro (until 1999—ECU) | 19.98% | 20.40% | 20.59% | 21.29% | 20.59% | 20.67% | 20.17% | 19.14% | 19.14% | 21.20% | 24.20% | 24.05% | 24.40% | 25.71% | 27.66% | 26.21% | 26.14% | 24.99% | 23.89% | 24.68% | 25.03% | 23.65% | 19.18% | 18.29% | 8.53% | 11.64% | 14.00% | 17.46% | |||
Japanese yen | 5.70% | 5.51% | 5.52% | 6.03% | 5.87% | 5.19% | 4.90% | 3.95% | 3.75% | 3.54% | 3.82% | 4.09% | 3.61% | 3.66% | 2.90% | 3.47% | 3.18% | 3.46% | 3.96% | 4.28% | 4.42% | 4.94% | 5.04% | 6.06% | 6.77% | 9.40% | 8.69% | 3.93% | 0.61% | ||
Pound sterling | 4.84% | 4.92% | 4.81% | 4.73% | 4.64% | 4.43% | 4.54% | 4.35% | 4.71% | 3.70% | 3.98% | 4.04% | 3.83% | 3.94% | 4.25% | 4.22% | 4.82% | 4.52% | 3.75% | 3.49% | 2.86% | 2.92% | 2.70% | 2.75% | 2.11% | 2.39% | 2.03% | 2.40% | 3.42% | 11.36% | 25.76% |
Canadian dollar | 2.58% | 2.38% | 2.38% | 2.08% | 1.86% | 1.84% | 2.03% | 1.94% | 1.77% | 1.75% | 1.83% | 1.42% | |||||||||||||||||||
Chinese renminbi | 2.29% | 2.61% | 2.80% | 2.29% | 1.94% | 1.89% | 1.23% | 1.08% | |||||||||||||||||||||||
Australian dollar | 2.11% | 1.97% | 1.84% | 1.83% | 1.70% | 1.63% | 1.80% | 1.69% | 1.77% | 1.59% | 1.82% | 1.46% | |||||||||||||||||||
Swiss franc | 0.23% | 0.23% | 0.17% | 0.17% | 0.15% | 0.14% | 0.18% | 0.16% | 0.27% | 0.24% | 0.27% | 0.21% | 0.08% | 0.13% | 0.12% | 0.14% | 0.16% | 0.17% | 0.15% | 0.17% | 0.23% | 0.41% | 0.25% | 0.27% | 0.33% | 0.84% | 1.40% | 2.25% | 1.34% | 0.61% | |
Deutsche Mark | 15.75% | 19.83% | 13.74% | 12.92% | 6.62% | 1.94% | 0.17% | ||||||||||||||||||||||||
French franc | 2.35% | 2.71% | 0.58% | 0.97% | 1.16% | 0.73% | 1.11% | ||||||||||||||||||||||||
Dutch guilder | 0.32% | 1.15% | 0.78% | 0.89% | 0.66% | 0.08% | |||||||||||||||||||||||||
Other currencies | 3.87% | 3.48% | 3.09% | 2.65% | 2.51% | 2.45% | 2.43% | 2.33% | 2.86% | 2.83% | 2.84% | 3.26% | 5.49% | 4.43% | 3.04% | 2.20% | 1.83% | 1.81% | 1.74% | 1.87% | 2.01% | 1.58% | 1.31% | 1.49% | 4.87% | 4.89% | 2.13% | 1.29% | 1.58% | 0.43% | 0.03% |
Source: World Currency Composition of Official Foreign Exchange Reserves. International Monetary Fund. |
The percental composition of currencies of official foreign exchange reserves from 1995 to 2022. [16] [17] [18]
Graphs are unavailable due to technical issues. There is more info on Phabricator and on MediaWiki.org. |
Economists debate whether a single reserve currency will always dominate the global economy. [19] Many have recently argued that one currency will almost always dominate due to network externalities (sometimes called "the network effect"), especially in the field of invoicing trade and denominating foreign debt securities, meaning that there are strong incentives to conform to the choice that dominates the marketplace. The argument is that, in the absence of sufficiently large shocks, a currency that dominates the marketplace will not lose much ground to challengers.
However, some economists, such as Barry Eichengreen, argue that this is not as true when it comes to the denomination of official reserves because the network externalities are not strong. As long as the currency's market is sufficiently liquid, the benefits of reserve diversification are strong, as it insures against large capital losses. The implication is that the world may well soon begin to move away from a financial system dominated uniquely by the US dollar. In the first half of the 20th century, multiple currencies did share the status as primary reserve currencies. Although the British Sterling was the largest currency, both the French franc and the German mark shared large portions of the market until the First World War, after which the mark was replaced by the dollar. Since the Second World War, the dollar has dominated official reserves, but this is likely a reflection of the unusual domination of the American economy during this period, as well as official discouragement of reserve status from the potential rivals, Germany and Japan.
The top reserve currency is generally selected by the banking community for the strength and stability of the economy in which it is used. Thus, as a currency becomes less stable, or its economy becomes less dominant, bankers may over time abandon it for a currency issued by a larger or more stable economy. This can take a relatively long time, as recognition is important in determining a reserve currency. For example, it took many years after the United States overtook the United Kingdom as the world's largest economy before the dollar overtook the pound sterling as the dominant global reserve currency. [1] In 1944, when the US dollar was chosen as the world reference currency at Bretton Woods, it was only the second currency in global reserves. [1]
The G8 also frequently issues public statements as to exchange rates. In the past due to the Plaza Accord, its predecessor bodies could directly manipulate rates to reverse large trade deficits.
The United States dollar is the most widely held currency in the allocated reserves. As of the fourth quarter of 2022, the USD accounted for 58.36% of official foreign exchange reserves. [20] [21] [ needs update ] This makes it somewhat easier for the United States to run higher trade deficits with greatly postponed economic ramifications or even postponing a currency crisis. Central bank US dollar reserves, however, are small compared to private holdings of such debt. If non-United States holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, then there could be serious consequences for the US economy. The decline of the pound sterling took place gradually over time, and the markets involved adjusted accordingly. [1]
However, the US dollar remains the preferred reserve currency because of its stability due to scale and liquidity. [22] [ needs update ]
The US dollar's position in global reserves is often questioned because of the growing share of unallocated reserves, and because of the doubt regarding dollar stability in the long term. [23] [24] However, in the aftermath of the 2008 to 2010 financial crisis, the dollar's share in the world's foreign-exchange trades rose slightly from 85% in 2010 to 87% in 2013. [25] [ better source needed ][ needs update ]
The dollar's role as the undisputed reserve currency of the world allows the United States to impose unilateral sanctions against actions performed between other countries, for example the American fine against BNP Paribas for violations of U.S. sanctions that were not laws of France or the other countries involved in the transactions. [26] In 2014, China and Russia signed a 150 billion yuan central bank liquidity swap line agreement to get around European and American sanctions on their behaviors. [27] [ better source needed ]
The euro is currently the second most commonly held reserve currency, representing about 20% of international foreign currency reserves. After World War II and the rebuilding of the German economy, the German mark gained the status of the second most important reserve currency after the US dollar. When the euro was introduced on 1 January 1999, replacing the mark, French franc and ten other European currencies, it inherited the status of a major reserve currency from the mark. Since then, its contribution to official reserves has risen continually as banks seek to diversify their reserves, and trade in the eurozone continues to expand. [28]
After the euro's share of global official foreign exchange reserves approached 25% as of year-end 2006 (vs 65% for the U.S. dollar; see table above), some experts have predicted that the euro could replace the dollar as the world's primary reserve currency. See Alan Greenspan, 2007; [29] and Frankel, Chinn (2006) who explained how it could happen by 2020. [30] [31] However, as of 2022 none of this has come to fruition due to the European debt crisis which engulfed the PIIGS countries from 2009 to 2014. Instead the euro's stability and future existence was put into doubt, and its share of global reserves was cut to 19% by year-end 2015 (vs 66% for the USD). As of year-end 2020 these figures stand at 21% for EUR and 59% for USD.
The United Kingdom's pound sterling was the primary reserve currency of much of the world in the 19th century and first half of the 20th century. [1] That status ended when the UK almost bankrupted itself fighting World War I [32] and World War II [33] and its place was taken by the United States dollar.
In the 1950s, 55% of global reserves were still held in sterling; but the share was 10% lower within 20 years. [1] [34]
The establishment of the U.S. Federal Reserve System in 1913 and the economic vacuum following the World Wars facilitated the emergence of the United States as an economic superpower. [35]
As of 30 September 2021 [update] , the pound sterling represented the fourth largest proportion (by USD equivalent value) of foreign currency reserves and 4.78% of those reserves. [36]
Japan's yen is part of the International Monetary Fund's (IMF) special drawing rights (SDR) valuation. The SDR currency value is determined daily by the IMF, based on the exchange rates of the currencies making up the basket, as quoted at noon at the London market. The valuation basket is reviewed and adjusted every five years. [37]
The SDR Values and yen conversion for government procurement are used by the Japan External Trade Organization for Japan's official procurement in international trade. [38]
The Chinese renminbi officially became a supplementary forex reserve asset on 1 October 2016. [39] It represents 10.92% of the IMF's Special Drawing Rights (SDR) currency basket. [40] [41] The Chinese renmimbi is the third reserve currency after the U.S. dollar and euro within the basket of currencies in the SDR. [40] (As shown in the table above, the renmimbi is the sixth largest component of international currency reserves.)
A number of central banks (and commercial banks) keep Canadian dollars as a reserve currency. In the economy of the Americas, the Canadian dollar plays a similar role to that played by the Australian dollar (AUD) in the Asia-Pacific region. The Canadian dollar (as a regional reserve currency for banking) has been an important part of the British, French and Dutch Caribbean states' economies and finance systems since the 1950s. [42] The Canadian dollar is also held by many central banks in Central America and South America. It is held in Latin America because of remittances and international trade in the region. [42]
Because Canada's primary foreign-trade relationship is with the United States, Canadian consumers, economists, and many businesses primarily define and value the Canadian dollar in terms of the United States dollar. Thus, by observing how the Canadian dollar floats in terms of the US dollar, foreign-exchange economists can indirectly observe internal behaviours and patterns in the US economy that could not be seen by direct observation. Also, because it is considered a petrodollar, the Canadian dollar has only fully evolved into a global reserve currency since the 1970s, when it was floated against all other world currencies.
The Canadian dollar, from 2013 to 2017, was ranked fifth among foreign currency reserves in the world, overtaking Australian Dollar, but is then being overtaken by Chinese Yuan. [43]
The Swiss franc, despite gaining ground among the world's foreign-currency reserves [44] and being often used in denominating foreign loans, [45] cannot be considered as a world reserve currency, since the share of all foreign exchange reserves held in Swiss francs has historically been well below 0.5%. The daily trading market turnover of the franc, however, ranked fifth, or about 3.4%, among all currencies in a 2007 survey by the Bank for International Settlements. [46]
John Maynard Keynes proposed the bancor, a supranational currency to be used as unit of account in international trade, as reserve currency under the Bretton Woods Conference of 1945. The bancor was rejected in favor of the U.S. dollar.
A report released by the United Nations Conference on Trade and Development in 2010, called for abandoning the U.S. dollar as the single major reserve currency. The report states that the new reserve system should not be based on a single currency or even multiple national currencies but instead permit the emission of international liquidity to create a more stable global financial system. [47] [48] [49] [50]
Countries such as Russia and China, central banks, and economic analysts and groups, such as the Gulf Cooperation Council, have expressed a desire to see an independent new currency replace the dollar as the reserve currency. However, it is recognized that the US dollar remains the strongest reserve currency. [51]
On 10 July 2009, Russian President Medvedev proposed a new 'World currency' at the G8 meeting in London as an alternative reserve currency to replace the dollar. [52]
At the beginning of the 21st century, gold and crude oil were still priced in dollars, which helps export inflation and has brought complaints about OPEC's policies of managing oil quotas to maintain dollar price stability. [53]
Due to the Russian invasion of Ukraine and international sanctions, Russia has used the United Arab Emirates dirham as a neutral currency when selling oil to India. [54] [55]
Some have proposed the use of the International Monetary Fund's (IMF) special drawing rights (SDRs) as a reserve. The value of SDRs are calculated from a basket determined by the IMF of key international currencies, which as of 2016 consisted of the United States dollar, euro, renminbi, yen, and pound sterling.
Ahead of a G20 summit in 2009, China distributed a paper that proposed using SDRs for clearing international payments and eventually as a reserve currency to replace the U.S. dollar. [56]
On 3 September 2009, the United Nations Conference on Trade and Development (UNCTAD) issued a report calling for a new reserve currency based on the SDR, managed by a new global reserve bank. [57] The IMF released a report in February 2011, stating that using SDRs "could help stabilize the global financial system." [58] The SDR itself is only a minuscule fraction of global currency reserves. [59]
According to some cryptocurrency proponents, digital cryptocurrencies could potentially replace fiat currencies as a possible global reserve currency. [60]
A currency is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general definition is that a currency is a system of money in common use within a specific environment over time, especially for people in a nation state. Under this definition, the British Pound sterling (£), euros (€), Japanese yen (¥), and U.S. dollars (US$) are examples of (government-issued) fiat currencies. Currencies may act as stores of value and be traded between nations in foreign exchange markets, which determine the relative values of the different currencies. Currencies in this sense are either chosen by users or decreed by governments, and each type has limited boundaries of acceptance; i.e., legal tender laws may require a particular unit of account for payments to government agencies.
Special drawing rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged. SDRs were created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and U.S. dollars. The ISO 4217 currency code for special drawing rights is XDR and the numeric code is 960.
A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the late 1920s to 1932 as well as from 1944 until 1971 when the United States unilaterally terminated convertibility of the US dollar to gold, effectively ending the Bretton Woods system. Many states nonetheless hold substantial gold reserves.
Currency substitution is the use of a foreign currency in parallel to or instead of a domestic currency.
The global financial system is the worldwide framework of legal agreements, institutions, and both formal and informal economic action that together facilitate international flows of financial capital for purposes of investment and trade financing. Since emerging in the late 19th century during the first modern wave of economic globalization, its evolution is marked by the establishment of central banks, multilateral treaties, and intergovernmental organizations aimed at improving the transparency, regulation, and effectiveness of international markets. In the late 1800s, world migration and communication technology facilitated unprecedented growth in international trade and investment. At the onset of World War I, trade contracted as foreign exchange markets became paralyzed by money market illiquidity. Countries sought to defend against external shocks with protectionist policies and trade virtually halted by 1933, worsening the effects of the global Great Depression until a series of reciprocal trade agreements slowly reduced tariffs worldwide. Efforts to revamp the international monetary system after World War II improved exchange rate stability, fostering record growth in global finance.
In macroeconomics, hard currency, safe-haven currency, or strong currency is any globally traded currency that serves as a reliable and stable store of value. Factors contributing to a currency's hard status might include the stability and reliability of the respective state's legal and bureaucratic institutions, level of corruption, long-term stability of its purchasing power, the associated country's political and fiscal condition and outlook, and the policy posture of the issuing central bank.
In international economics, the balance of payments of a country is the difference between all money flowing into the country in a particular period of time and the outflow of money to the rest of the world. In other words, it is economic transactions between countries during a period of time. These financial transactions are made by individuals, firms and government bodies to compare receipts and payments arising out of trade of goods and services.
The Bretton Woods system of monetary management established the rules for commercial relations among the United States, Canada, Western European countries, and Australia and other countries, a total of 44 countries after the 1944 Bretton Woods Agreement. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent states. The Bretton Woods system required countries to guarantee convertibility of their currencies into U.S. dollars to within 1% of fixed parity rates, with the dollar convertible to gold bullion for foreign governments and central banks at US$35 per troy ounce of fine gold. It also envisioned greater cooperation among countries in order to prevent future competitive devaluations, and thus established the International Monetary Fund (IMF) to monitor exchange rates and lend reserve currencies to nations with balance of payments deficits.
In public finance, a currency board is a monetary authority which is required to maintain a fixed exchange rate with a foreign currency. This policy objective requires the conventional objectives of a central bank to be subordinated to the exchange rate target. In colonial administration, currency boards were popular because of the advantages of printing appropriate denominations for local conditions, and it also benefited the colony with the seigniorage revenue. However, after World War II many independent countries preferred to have central banks and independent currencies.
In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket. The opposite of devaluation, a change in the exchange rate making the domestic currency more expensive, is called a revaluation. A monetary authority maintains a fixed value of its currency by being ready to buy or sell foreign currency with the domestic currency at a stated rate; a devaluation is an indication that the monetary authority will buy and sell foreign currency at a lower rate.
Foreign exchange reserves are cash and other reserve assets such as gold and silver held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.
The Triffin dilemma is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. This dilemma was identified in the 1960s by Belgian-American economist Robert Triffin. He noted that a country whose currency is the global reserve currency, held by other nations as foreign exchange (FX) reserves to support international trade, must somehow supply the world with its currency in order to fulfill world demand for these FX reserves. This supply function is nominally accomplished by international trade, with the country holding reserve currency status being required to run an inevitable trade deficit. After going off of the gold standard in 1971 and setting up the petrodollar system later in the 1970s, the United States accepted the burden of such an ongoing trade deficit in 1985 with its permanent transformation from a creditor to a debtor nation. The U.S. goods trade deficit is currently on the order of one trillion dollars per year. Such a continuing drain to the United States in its balance of trade leads to ongoing tension between its national trade policies and its global monetary policy to maintain the U.S. dollar as the current global reserve currency. Alternatives to international trade that address this tension include direct transfer of dollars via foreign aid and swap lines.
In international finance, a world currency, supranational currency, or global currency is a currency that would be transacted internationally, with no set borders.
Currency intervention, also known as foreign exchange market intervention or currency manipulation, is a monetary policy operation. It occurs when a government or central bank buys or sells foreign currency in exchange for its own domestic currency, generally with the intention of influencing the exchange rate and trade policy.
An international monetary system is a set of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between states that have different currencies. It should provide means of payment acceptable to buyers and sellers of different nationalities, including deferred payment. To operate successfully, it needs to inspire confidence, to provide sufficient liquidity for fluctuating levels of trade, and to provide means by which global imbalances can be corrected. The system can grow organically as the collective result of numerous individual agreements between international economic factors spread over several decades. Alternatively, it can arise from a single architectural vision, as happened at Bretton Woods in 1944.
The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per troy ounce by interventions in the London gold market.
A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used by investors to minimize the risk of currency fluctuations and also governments when setting the market value of a country's currency.
The foreign exchange reserves of India are holdings of cash, bank deposits, bonds, and other financial assets denominated in currencies other than India's national currency, the Indian rupee. The foreign-exchange reserves are managed by the Reserve Bank of India (RBI) for the Indian government, and the main component is foreign currency assets.
In 1945, China cofounded the International Monetary Fund (IMF) with 34 other nations. China was initially represented by the Republic of China. In April 1980, representation transferred to the People's Republic of China. The Chinese-IMF relationship mainly operates around affairs associated with IMF governance and the IMF Special Drawing Rights (SDR).