Such claims are usually made when the speaker’s tongue is firmly attached to their cheek. Inside Curious features of the currency include capital control (Chinese yuan), hyperinflation (Argentine peso) and “unconventional” monetary policy (Turkish lira). The liquidity crisis during the market could lead to a severe devaluation of Sterling, explaining why it is not a safe haven like the dollar or the Swiss franc. But in normal times, call a bank’s foreign exchange (FX) The trading desk is asking to sell half a billion pounds and they will not struggle to do so. That they could be for a Inside Currency is a distinctive feature of the department.
Indeed, Sterling is notable for contrast: it plays a strangely outsourcing role. FX Market Britain accounts for 3% of the world GDP. Yet over the last 20 years its currency has consistently involved more than a tenth of it FX Business
So why would traders like sterling, if it is so fragile? You can make a foreign currency transaction if you want to buy a product or service from the country that issued it. Or you can sell something in exchange and convert the income into your currency. Neither explains Sterling’s popularity: in 2019, Britain accounted for 3.8% of global goods imports and 2.6% of exports. Or it does not specialize in central-bank holdings (it makes up less than 5% of the global reserves). The dollar dominates global financing, with many governments borrowing it and some market-products being priced. The pound does none of these things.
In fact, it is a medium for lesser goals: speculation and cross-border investment. People take a punt on the value of sterling or they trade to buy or sell British assets. It has more in common with other rich-world currencies. Like Sterling, the Australian dollar is issued by an open, developed economy that relies heavily on trade. Punters use both to bet on trends larger than their issuer’s economic footprint: a proxy for sterling risk appetite; Aussie dollars for commodity prices. And they are bigger FX The market than the height of their economy or the trade volume warrant. Australia is less than 2% of the world GDPYet its dollar is within 6.8% FX Business