The rise of China as an economic powerhouse and the relative
nervousness in the US economy often leads discussion in the
domain to questions such as can the Chinese yuan become the next
reserve currency? Will the yuan challenge the status of US
dollar? The biggest economic advantage, it is often argued, that
the US has today is its currency -- the US dollar. Put
differently, the US, like any other country such as India, for
all practical purposes, does not necessarily has to export goods
and services to earn foreign currency to be able to buy goods
and services in the world market. It can simply print more
dollars and buy anything it wants anywhere in the world. This is
because dollar is accepted all over the world and a bulk of
trade happens in dollar terms. Therefore, central banks also
prefer to hold the surplus of a country in dollar-denominated
assets such as bonds issued by the US government, which makes
dollar a reserve currency. Since a bulk of the trade happens in
dollar terms, it is also termed as v