A foreign currency that is held in large reserves by a government or other monetary authority. A reserve currency is used by that government to participate in the global economy and to back said government’s own currency. As a result of the Bretton Woods Agreement, the US dollar has become the world’s reserve currency and is backed by the world’s largest gold reserves. Therefore, instead of gold, other countries have accumulated reserves of US dollars.
We don't know everything about the markets. We're just devoted to learners. Taken from those smarter than ourselves, here's how we define Reserve Currency.