Why is the US dollar the reserve currency in the world? Why not any other currency?

ArlingtonVA

The key is in the last quoted sentence. "The United States dollar is the most widely held reserve currency in the world today. Throughout the last decade, an average of two thirds of the total allocated foreign exchange reserves of countries have been in U.S. dollars. For this reason, the U.S. dollar is said to have "reserve-currency status.... "After World War II, the international financial system was governed by a formal agreement, the Bretton Woods System. Under this system the US dollar was placed deliberately at the centre 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 if they so desired. European countries and Japan deliberately devalued their currencies against the dollar in order to boost exports and development. " In the late 1960s and early 70s the system came apart under pressure from the rising prominence of the other countries, as well as growing deficits in the US. The US dollar remained central due to 'a lack of competitor currencies'." Add to this countries' abilities to have reasonable confidence in the dollar, and their ability to hold dollars and thereby weaken their own currencies (for export pricing benefits). http://en.wikipedia.org/wiki/Reserve_currency Jul 05 09, 2:05 PM