A world currency does not exist. However, reserve currencies are used by central banks, corporations, and governments for international transactions. Since World War II, the dominant global reserve currency has been the U.S. dollar. 澳洲幸运5官方开奖结果体彩网:Emerging market economies often have debt denominated in U.S. dollars instead of loc▨al currency.

USD and the Gold Standard

All currencies were once backed by gold, meaning that every country had to hold enough gold in reserve for the 澳洲幸运5官方开奖结果体彩网:currency in circulation. England was the first country to adopt a 澳洲幸运5官方开奖结果体彩网:gold standard in 1819.

After World War II, Western powers developed the 澳洲幸运5官方开奖结果体彩网:Bretton Woods Agreement, the framework for the global currency markets until 1971. Within the Bretton Woods system, all national currencies were valued at the U.S. dollar, which became the dominant reserve currency.

Due to the global expansion after the war, bank reserves did not hold enough gold to back the domestic currency to finance expansion. Consequently, the U.S. disconnected from the 澳洲幸运5官方开奖结果体彩网:gold standard and began to print more paper money to finance the world's growth requirements. Because the U.S. was a strong economy, other countries agreed to accept the dollar as tender and followed suit.

De Facto World Currency

About 60% of the central bank currency reserves are held in U.S. dollars. Central banks hold reserves to facilitate trade and financial transactions. About 90% of the world's 澳洲幸运5官方开奖结果体彩网:foreign exchange transactions are in dollars. Many 澳洲幸运5官方开奖结果体彩网:commodities are priced in dollars since the dollar provides a stable medium of exchange between international companies. Dollar-denominated commodities include:

• 澳洲幸运5官方开奖结果体彩网:Crude oil
• 澳洲幸运5官方开奖结果体彩网:Natural gas
• Gold
• Silver
• Copper
• Aluminum
• Platinum
• Wheat
• Corn
• Soybeans

Other Reserve Currencies

While the U.S. dollar remains the dominant reserve currency, the world can be divided into three main currency blocks, with the Americas dealing mostly in dollars, Europe dealing in euros, and the Asian countries mostly connected to the yen. In 2024, two other major reserve currencies are the euro and the Japanese yen (JPY).

A 澳洲幸运5官方开奖结果体彩网:cross-currency is when a currency pair or transaction does not involve the U.S. dollar, such as Australia with Japan using AUD/JPY. A 澳洲幸运5官方开奖结果体彩网:floating exchange rate is where the currency price of a nation is set by the forex market based on 澳洲幸运5官方开奖结果体彩网:supply and demand relative to other currencies.

When countries can intervene to buy or sell their currency to minimize value fluctuations, it is deemed a "managed floating exchange rate." Australia, Canada, Japan, and the United States have this type of exchange rate.

The Bottom Line

Although the U.S. dollar is the world's most widely used reserve currency, there is no distinct world currency. Approximately 60% of global central bank currency reserves are held in U.S. dollars. The euro and Japanese yen are also considered major reserve currencies.