1. By www.TheForexNittyGritty.com

2. Most Forex traders view the US dollar as a safe haven currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 3. After all, the USD accounts for nearly two thirds of foreign currency reserves held by the central banks of the world.http://www.theforexnittygritty.com/forex/ world-reserve-currency 4. The Euro holds second place with just under a fourth of all currency reserves.http://www.theforexnittygritty.com/forex/ world-reserve-currency 5. There are a number of advantages to the USA of having what amounts to the world reserve currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 6. Virtually all commodities are denominated in US dollars. The USD is part of eighty-five percent of all Forex trades.http://www.theforexnittygritty.com/forex/ world-reserve-currency 7. Many foreign contracts are written in US dollars even though the USD is not the home currency of either party.http://www.theforexnittygritty.com/forex/ world-reserve-currency 8. And, when the United States wants to borrow money to finance its ever-growing debt, everyone still is willing to purchase United States Treasuries with their currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 9. There is no risk in the short term that this situation will change because of the fact that the US economy is far and away the largest in the world.http://www.theforexnittygritty.com/forex/ world-reserve-currency 10. However, there are a couple of concerns regarding the status of the dollar as the world reserve currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 11. These are the risk of debt default due to a malfunctioning political system in the USA and continuing long term devaluation of the USD.http://www.theforexnittygritty.com/forex/ world-reserve-currency 12. Risk Hedging versus Speculationhttp://www.theforexnittygritty.com/forex/ world-reserve-currency 13. Foreign currency trading serves two purposes.http://www.theforexnittygritty.com/forex/ world-reserve-currency 14. First and foremost the Forex market exists to facilitate international trade and the movement of wealth.http://www.theforexnittygritty.com/forex/ world-reserve-currency 15. Companies that do business in the international arena and people who earn their money in unstable regions of the world prefer a stable currency for doing business and storing wealth.http://www.theforexnittygritty.com/forex/ world-reserve-currency 16. The second purpose is speculation.http://www.theforexnittygritty.com/forex/ world-reserve-currency 17. Currency speculators do not especially care for stable currencies.http://www.theforexnittygritty.com/forex/ world-reserve-currency 18. Rather they would prefer that the USD is going up or down but not standing still.http://www.theforexnittygritty.com/forex/ world-reserve-currency 19. The status of the USD as the world reserve currency affects its use in international trade and it especially affects the use of the USD as a safe haven currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 20. Short versus Long Term Competition for World Reserve Currency Statushttp://www.theforexnittygritty.com/forex/ world-reserve-currency 21. Given the economic weakness of the European Union and speculation as to its breakup the Euro poses no short term threat the USD as world reserve currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 22. China is intent on making the Yuan an international currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 23. However, the Yuan exchange rate is fixed within a government prescribed trading range.http://www.theforexnittygritty.com/forex/ world-reserve-currency 24. And, the Yuan is to a large degree an instrument of economic and political policy of the ruling Communist regime in Beijing.http://www.theforexnittygritty.com/forex/ world-reserve-currency 25. The Chinese economy is a fraction of that of the USA and would need to continue its breakneck pace of the last couple of decades to catch up.http://www.theforexnittygritty.com/forex/ world-reserve-currency 26. And cracks are showing in the Chinese economic miracle just recently addressed by the Communist hierarchy. In all likelihood no one is going to want to store value long term in Yuan when they can put all of part in the USD, Euro, British Pound, or Swiss franc.http://www.theforexnittygritty.com/forex/ world-reserve-currency 27. To be a world reserve currency means that the currency needs to engender confidence.http://www.theforexnittygritty.com/forex/ world-reserve-currency 28. The Euro is currently questionable. None other is as strong.http://www.theforexnittygritty.com/forex/ world-reserve-currency 29. And until China lets its currency float with the market it will engender no confidence as a safe haven or world reserve currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 30. Threats to the USD as World Reserve Currencyhttp://www.theforexnittygritty.com/forex/ world-reserve-currency 31. The USD will probably adjust downward a bit as the Fed continues its quantitative easing program.http://www.theforexnittygritty.com/forex/ world-reserve-currency 32. It may jump up as the Fed backs off and interest rates go up.http://www.theforexnittygritty.com/forex/ world-reserve-currency 33. But over time a weaker dollar will help the USA bring manufacturing back home and stimulate the economy.http://www.theforexnittygritty.com/forex/ world-reserve-currency 34. If the dollar continues to fall, year after year, it could eventually be too cheap to be a world reserve currency.http://www.theforexnittygritty.com/forex/ world-reserve-currency 35. After all who wants to hold a currency that is on its way to being worth pennies on the dollar?http://www.theforexnittygritty.com/forex/ world-reserve-currency 36. This scenario is not likely to happen and certainly not in the near future.http://www.theforexnittygritty.com/forex/ world-reserve-currency 37. However, a viable threat is the current dysfunction of the US government.http://www.theforexnittygritty.com/forex/ world-reserve-currency 38. Those who wish to park their wealth in a stable currency are not pleased to think that tomorrow they will not receive interest on their US treasuries or that the US could default on its sovereign debt.http://www.theforexnittygritty.com/forex/ world-reserve-currency 39. To quote Abraham Lincoln, if destruction be our lot we must ourselves be its author and finisher.http://www.theforexnittygritty.com/forex/ world-reserve-currency 40. Or, we have met the enemy and he is us,Pogo Possum.http://www.theforexnittygritty.com/forex/ world-reserve-currency