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Reserve currency

A reserve currency is a currency that is widely held by central banks and other financial institutions around the world as a means of international trade and investment. It is often used as a "safe haven" currency during times of economic or political uncertainty, as it is perceived as a stable and reliable store of value.

The US dollar is currently the world's dominant reserve currency, but other currencies, such as the euro and the yen, also play important roles in international finance. A reserve currency has several benefits: it provides a stable means of exchange, it facilitates global trade and investment, and it helps to maintain stability in the global financial system. However, it also has drawbacks, such as exposure to exchange rate fluctuations and the potential for over-reliance on a single currency.

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