When considering investments in currency, I wonder if currency belongs to real assets or financial assets, and why? Thanks!

Note: I learned that assets are divided into real assets and financial assets from Bodie's textbook "Investments".


Currencies are a financial asset. Real assets must have a productive capacity. That is, they must be able to produce a good or service. Currencies, in contrast, are actually liabilities of the issuing government. In the case of the US Dollar, each paper bill is marked as a "Federal Reserve Note" which makes it clear that

Legally, they are liabilities of the Federal Reserve Banks and obligations of the United States government.

  • Thanks! So currencies are financial asset, but are they financial instrument?
    – Tim
    Sep 20 '11 at 14:04

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