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At that point the UK was the primary exporter of manufactured goods and services and over 60% of world trade was invoiced in pound sterling.British banks were also expanding overseas, London was the world centre for insurance and commodity markets and British capital was the leading source of foreign investment around the world; sterling soon became the standard currency used for international commercial transactions. For example, suppose an American company sells electrical equipment to a buyer in France for one million euros.
The reserve currency is commonly used in international transactions and often considered a hard currency or safe-haven currency.
People who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than people in other nations because they don't need to exchange their currency to do so.
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