United States dollar

The United States dollar is the most important 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", making it somewhat easier for the United States to run higher trade deficits with greatly postponed economic impact (currency crisis). Central bank reserves held in dollar-denominated debt, however, are relatively small compared to private holdings of such debt. If foreign holders of dollar-denominated assets decided to shift holdings to assets denominated in other currencies, there could be serious consequences for the U.S. economy. Changes in the structure of the international financial system, however, typically occur only gradually. Thus, a large, sudden shift away from dollar reserve holdings is unlikely