Currency Internationalization

The widespread use of a currency outside the original country in which it was created for the purposes of conducting transactions between sovereign states. The level of currency internationalization for a currency is determined by the demand other countries have for that currency. This depends on the amount of business that is performed between the countries and/or the perceived value of the currency as a good store of value.

From the 1970s onward, the currency with the highest amount of currency internationalization was the U.S. dollar.

Billions (if not trillions) of U.S. dollar reserves are held in Asian countries (such as Japan or China), which has caused the U.S. dollar to rise in value in recent years. However, there are concerns as to what would happen if some other currency (such as the euro) gained higher rates of currency internationalization. Some believe that the resulting flood of U.S. dollars could dramatically decrease the value of the dollar and take away America's title as the world's strongest economy.


Investment dictionary. . 2012.

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