<P> A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves . The reserve currency is commonly used in international transactions, international investments and all aspects of the global economy . It is often considered a hard currency or safe - haven currency . People who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than people in other nations because they do not need to exchange their currency to do so . </P> <P> By the end of the 20th century, the United States dollar was considered the world's most dominant reserve currency . The world's need for dollars has allowed the United States government as well as Americans to borrow at lower costs, granting them an advantage in excess of $100 billion per year . </P> <P> Reserve currencies come and go . International currencies in the past have included the Greek drachma, coined in the fifth century B.C., the Roman denari, the Byzantine solidus and Arab dinar of the middle - ages, the Venetian ducato and the Florentine florin of the Renaissance, the seventeenth century Dutch guilder and the French franc . </P>

When did the us dollar became the world reserve currency