What makes a currency stable? A stable currency is one that can successfully hold its unit of account or purchasing power over some time. At a basic level, a currency is stable when the international currency exchange rates do not fluctuate too much as against the Consumer Price Index. The reserve status is based largely on the size and strength of the U.S. economy and the dominance of the U.S. financial markets. Despite large deficit spending, trillions of dollars in debt, and the unbridled printing of U.S. dollars, U.S. Treasury securities remain the safest store of money. Countries, especially developing ones, pursue stable exchange rates to attract foreign capital. They usually accomplish this by fixing their currencies to that of a more stable country, a practice called pegging. A country's central bank may increase or decrease the money supply to maintain this rate.
