Forex Dictionary Terms

World Currency

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Definition – What does World Currency mean?

A world currency is a theoretical trade currency that would replace national currencies as the primary currency for international trade. There is currently no world currency. Instead, nations hold reserves of widely-used currencies, particularly the U.S. dollar.

ForexTerms explains World Currency

The idea of a world currency has surfaced many times in the past. Often, the calls for a world currency follow economic hardship or periods worldwide financial instability that shake up the value of commonly held reserve currencies. The challenges facing the implementation of a worldwide currency for trade purposes are the same as those facing each nation – mainly, who controls the amount of currency being issued? Theoretically, a worldwide currency could float above national currencies on an open market. In practice, there is a good chance it would simply become another layer for traders to work with, allowing them to create synthetic currency pairs by shorting one currency against the world currency and going equally long on another – essentially changing nothing.

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