WBCS Preliminary Examination 2024 — General Studies · Question 47 of 200

Answer: (D) None of the above

A vehicle currency is one used as the go-between in foreign-exchange deals, for example converting rupees to dollars and then dollars to pesos, because direct markets between most currency pairs are thin. That role is played overwhelmingly by the US dollar, which is on one side of nearly 90% of all foreign-exchange transactions and is also the leading reserve and trade-invoicing currency. As the dollar is not listed, the answer is 'None of the above'; the euro, yen and pound rank second, third and fourth. Related terms: hard currency (stable and widely accepted), hot money (short-term speculative flows) and the IMF's SDR basket (US dollar, euro, Chinese renminbi, Japanese yen and pound sterling).