Reserve Currency

A reserve currency is the money other countries keep in their piggy banks. Central banks hold it to pay for imports, service foreign debt and defend their own currencies in a crisis. The US dollar is by far the biggest, followed at a distance by the euro, with the yen, pound and others in smaller shares.

Being the top reserve currency brings steady demand, which helps keep borrowing costs lower; economists call this an "exorbitant privilege". It also creates tensions, captured in the Triffin dilemma.