18  BIS Review 121/2009  increase long-term inflation risks and make the dollar as reserve currency less attractive. Officials of China, which is the largest foreign holder of US assets, have called for changes in the world monetary order and a move to a new global reserve currency.
The final chapter considers the challenges of international currency status and the euro’s prospects on the international stage. Being the issuer of an international currency brings potentially significant advantages. As the market for assets denominated in a leading currency is liquid, external imbalances can be managed much more easily. The issuing country profits not only from more elastic demand but also lower interest rates.