It's no secret that in the modern world money is of great importance. What is happening today with the Russian economy is directly related not only to the cost of oil, the situation in Ukraine, but also to the financial market. World reserve currencies are, first of all, a certain island of security on which Russian citizens feel somewhat more reliable. The ruble has always been considered not too stable, but at the same time it occupied a well-deserved place in the financial market. Unfortunately, due to the fact that the national ruble has been behaving extremely insecure recently, many have chosen precisely the world's reserve currencies to preserve their savings. What kind of money can rightfully be considered as such? Indeed, in the financial market there are a lot of various monetary units that can be considered quite reliable. How many reserve currencies in the world and why are they chosen as a kind of "refuge"?
What is a reserve currency?
The modern business society under the concept of world reserve currency refers to the monetary unit required by banks of other states to create some kind of foreign exchange reserve. First of all, it is used as a tool for trade between different countries. And also used as international assets, establishing a strong relationship between the two leading currencies. Often this term is used to denote monetary units in the calculations of the bank with certain organizations. Previously, such currencies were used to calculate in the gold and oil markets, thereby determining the value of these resources. Today, they are used mainly for the accumulation of gold and foreign exchange reserves, and also strengthen the possibilities of export competition by weakening their own monetary value.
World reserve currencies are a kind of "airbag" in the event of financial instability. But initially it is worth noting that such cash reserves serve as a safety net in the event of a financial crisis. It is no secret that it is precisely the world's reserve currencies that contribute to the weakening of the national currency. Which ones - we will consider further.
How many reserve currencies are there in the world?
It has long been known that absolutely any currency can be a reserve currency. All that is needed is economic stability in its state, as well as the absence of revolutions and other upheavals. But even if the currency is stable, involved in world trade and has a developed financial market, this does not mean that it has the status of a reserve unit. After all, this status is acquired only after the leading banks of other countries begin to use it to preserve their own reserves. So it turns out that world reserve currencies are monetary units that act as an investment asset. Currently, several currencies are considered reserve money. First of all, this, of course, is the US dollar (USD) and such as the common European currency Euro (EUR), Japanese yen (JPY), British pound sterling (GBP), Swiss franc (CHF), as well as several others. It is these monetary units that are in the assets of most states.
Reserve currency dollar (USD)
The dollar appeared back in 1861. Then, at the request of the Congress, about 57 million banknotes were printed. Although the official birthday of the dollar is still considered July 6, 1785. It was on this day that he was officially registered. It is believed that it is the dollar - the world reserve currency No. 1. Indeed, over the past decade, more than 50% of the total gold and foreign exchange reserves of all countries of the world were calculated precisely in this monetary unit. Why is the dollar a global settlement and reserve currency? In order to answer this question, it is necessary to plunge into history a little.
When the consequences of World War II had already cleared up, it became clear that decisive action was necessary. So, at the next congress, a single price for 1 troy ounce of oil in the amount of $ 35 was adopted. And by this, countries recognized the American dollar as a single settlement and reserve currency. As you know, during the war, America's economy suffered the least, and the US gold reserve was huge. In addition, the United States had powerful industry. This was primarily due to the fact that countries in the trading market often wanted to buy something in return. This allowed the United States not only to appear as a leader in the global market, but also to strengthen the country's economy as a whole. It is not surprising that at that time, countries needed to engage in more exports, because such a strategy allowed to accumulate gold and currency. So it turned out that the United States, engaged in the export of its own currency, received the status of the most stable country, and the dollar took leadership positions and a high rank.
Euro (EUR) as world reserve currency
The history of this currency comes from 1995. It was this year in Madrid that the EU decided to "christen" the future common currency of eleven states - the "euro". Although the development of the project of the European currency began in 1979. This idea was truly grandiose. Indeed, earlier all attempts to create some kind of financial union ended in disastrous results. Just like the dollar, the euro has great support from other states, which gives it the opportunity to become the leading currency for the formation of exchange rates. But the fact that the members of the Union of Europe support this banknote has some negative impact associated with the irregular development of these states. Analysts believe that soon because the internationalization of the euro gave an impetus to the formation of a bipolar global monetary and financial system, it and the dollar will have an impact on different zones and territories. The euro is likely to remain within Eastern and Central Europe, and the dollar will dominate within South and East Asia, as well as Latin America. But today we can safely say that these are the two most powerful global reserve currencies.
Japanese Yen (JPY) - Honorary Third Place
Previously, the Japanese yen was considered one of the most powerful safe haven currencies. But over the past few years, its popularity has definitely fallen. And today this monetary unit occupies only the third place in the financial market. The yen was created in 1871, although in parallel with it there were other gold, silver and paper money. Well, the international title came to her on May 11, 1953, exactly when the International Monetary Fund legitimized its relationship with gold weighing 2.5 milligrams.
Of course, its volume in the modern financial market is significantly inferior to the leading dollar and euro. But this does not prevent the Japanese yen from taking an honorable third place among world reserve currencies. This monetary unit differs from its competitors in a sufficiently high round-the-clock liquidity throughout the world. And despite its position among the leaders, the yen is indispensable in international financial markets.
World currency pound sterling (GBP)
Pound sterling is a sufficiently sold currency in the world. That is why it takes fourth place in terms of trust among citizens of the whole Earth. The concept of "pound sterling" first appeared in 1694. And in the period from 1821 to 1914, this particular currency was considered the main reserve currency in the financial market. Unfortunately, after World War II, Great Britain weakened significantly. This gave the United States the opportunity to become a leader in a sense, and replace the pound with the dollar.
The emergence of the euro in the financial market has also had a significant impact on this currency. Indeed, before the EU decided to create a single European national currency, the pound benefited from all kinds of rumors about the convergence of the exchange rate. And if the results of the referendum in the UK were positive, then the pound would join the euro in 2000. The global market for almost 14% consists of pounds. And this is a very good result.
Stable Swiss Franc (CHF)
For the first time they started talking about this currency in 1850. At its nominal value, this currency was equal to the French franc. The main advantage of this currency is that it is almost the most stable in the world. Throughout history, the devaluation of the franc has been recorded only a few times. Thanks to this, he has high confidence among citizens of the whole world.
Traditionally, the Swiss franc is attributed to the monetary units of low-tax zones with zero inflation. As a reserve currency, he entrenched in fourth place. And although it represents the only monetary unit that is not included in the EU and the G7 countries, and its share almost never rises above 0.3%, thanks to its “eternal” stability, it never loses its position in the world market . Although, with the introduction of the European single currency, the constancy and invariance of the Swiss franc rate has been somewhat diminished.
Ruble and Yuan as reserve currencies
All world reserve currencies today have taken their deserved places. And if a few years ago, in 2007, the government of the Russian Federation announced that the ruble could safely go on world exports, then after all the crises experienced it became almost impossible. That is why most analysts concluded that in the near future the ruble will not be able to take a place among the safe haven currencies.
The same, in principle, cannot be said about the Chinese yuan. The world reserve currency, as you know, should have a "set of leadership qualities." Today, China is doing everything to ensure that its national currency strengthens and grows. And, according to leading experts, he does it well. Indeed, according to data for 2014, it was this currency that became one of the 10 actively traded, outstripping 22 “opponents” over the past three years. Work in the offshore market also has not stood still in recent years, and already at the end of March 2014, Germany agreed with China on cooperation in clearing, as well as on settlements in RMB. In addition, the Hong Kong and Shanghai stock exchanges opened the mechanism of cross-trading, gold in China's reserves increased significantly, and 40 world banks made investments in the Chinese currency. All this leads to the fact that in a few years the yuan will take the leader's place of honor as the No. 1 reserve currency in the world.
Forecast for 2015
It is difficult to imagine what the world monetary system will be in the coming years. In connection with the current crisis caused by a sharp decline in the cost of oil, it is rather difficult to assume that the financial world is waiting. The ruble failed, but today, Russia, together with China, is doing everything possible to minimize the impact of the US currency on the global financial market. And no matter how sad it sounds for the United States, the renminbi is guaranteed the future of the reserve currency anyway. After all, this is said not only by experts, but also by data on the study of world currency markets over the past few years. The Middle Kingdom has long proved its worth as a major trading force and the strongest exporter with the second largest economy in the world. And many experts claim that in 10 years the yuan will achieve its goals. In addition, China is already taking confident steps towards this. And, as you know, world reserve currencies are the currencies of those countries that have come a long way!