forexsq - Sterlingâ€™s renewed ascent to become the worldâ€™s third most important reserve currency after the dollar and the euro has exposed the U.K. to increased risk from holdings of British government debt by foreign monetary authorities.
Almost by stealth, certainly not by design, and partly because of setbacks in the euro area, Britain has recovered its role as a prime reserve currency country.
Along the way, the U.K. has benefited from the reserve-issuersâ€™ â€śexorbitant privilege,â€ť previously regarded primarily as the preserve of the U.S. This refers to the ability of a reserve-currency nation to print money that is acquired relatively expensively by foreign central banks, and thus helps subsidize the reserve countryâ€™s economy.
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