First, generally speaking, circulation is restricted by region.
The currency of a country or region circulates only internationally or regionally.
Outside its regional political confines, currencies would lose their political credibility and exchange value.
However, this has hampered international trade.
In order to promote the smooth flow of regional trade, the world currency came into being.
Gold and silver were the first recognized currencies of the world.
As trade between countries increased, a new world currency, the “international reserve currency”, emerged.
The international reserve currency is generally accepted by all countries and plays a universal equivalent role in the international commodity circulation.
Common currencies include, euro, etc.
Second, reserve?
To meet the needs of international payments, central banks hold foreign exchange reserves that can be used for external payments.
Not all national currencies can be considered international reserve currencies: only currencies that play an important role in the international monetary system and are freely convertible into other reserve assets can be considered international reserve currencies.
What constitutes foreign exchange reserves?
Usually, foreign exchange reserves come from and capital inflows are concentrated in the central bank to form foreign exchange reserves.
The specific forms include short-term deposits held abroad by the government or other forms of payment that can be cashed abroad (such as cheques, promissory notes, foreign currency bills of exchange, etc.).
The main use of foreign exchange reserves is repayment and intervention to maintain the local currency.
To some extent, the total amount of foreign exchange reserves reflects the ability of a country to cope with its international balance of payments and is related to the maintenance and stability of a country.
It is also an important indicator of the strength of a country’s economy, currency and balance of payments.
The ups and downs of the pandemic dented risk appetite, the dollar strengthened gold fell, and oil prices fell more than 2%.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
