Reserve currency and what is it?

The world monetary system has a number of official exchange reserve currency status, assigned by the IMF. A reserve currency - the currency is convertible, which is an international payments and reserve funds, is the basis for determining the exchange parity and exchange rates for currencies of other countries, used to conduct foreign exchange intervention and the formation of official foreign reserves of states. Thus, its main purpose - maintenance of international economic relations. In the reserve currency of the country hold their liquid assets, which may cover the negative balance of payments.

In 1995 the structure of international reserves, the currency composition was as follows: U.S. dollar - 56% DEM - 13.7%, Japanese yen - 7.1%, the ECU - 6.5%, the pound sterling - 3.4% , the French franc - 1.8%, the Swiss franc - 0.9%, Dutch Guilder - 0.4%.

In accordance with the dynamics of exchange rates may be the last "strong" and "weak." Considered to be a strong currency, the rate of which in relation to other national monetary units, or growing or stable long period of time. Is a weak currency, whose rate decreases relative to other currencies. In practice, the strongest currencies in the currency are mainly industrialized countries, and weak - the countries with underdeveloped economies, or the unstable economic situation.

Depending on how loosely or that the currency is exchanged for other currencies of different countries of the world economy, there are several types of currencies:

1. Freely convertible currency (FCC), which have unlimited internal and external complete reversibility and can be used to generate foreign exchange reserves. These are, according to the IMF, the U.S. dollar, German mark, British pound, French franc, Swiss franc, Japanese yen;

2. Partially convertible currency (internal and external) to which the currency exchange restrictions and are not at all foreign currency;

3. Closed (non-convertible) currency, which operate within a single country or exchanged for other currencies in the world currency market.

Other major element of the monetary system is the exchange rate regime.
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