Reserve Currency
FundamentalsA currency held in large quantities by central banks worldwide to settle trade and back their own currency — chiefly the US dollar.
A reserve currency is one that central banks and major institutions around the world hold in significant quantities as part of their foreign-exchange reserves, used to settle international trade and stabilize their own currency. The US dollar is by far the dominant global reserve currency, with the euro, yen, and a handful of others playing smaller roles.
Reserve-currency status gives a country's currency structurally deep liquidity and outsized influence on global capital flows, which is part of why USD pairs dominate forex trading volume.