The dollar is the reserve currency of the world, which makes it the currency of choice when it comes to central bank holdings. During testimony before Congress last week, Representatives and Senators questioned Fed Chairman Jerome Powell about the status of the dollar, and he gave a brief definition of the term reserve currency. The Chairman explained that the British pound was the reserve currency before the dollar and the foreign exchange instrument at the top of the heap tends to stay in that position for prolonged periods. Achieving reserve currency status comes from a