The United States is the country with the biggest and strongest economy, while also having the strongest and most widely used currency, the United States Dollar (USD). Countries around the world have reserve currencies, which are held by foreign government central banks to be used by foreign investors, use in foreign trade, and are freely convertible. Every country in the world has the USD in its reserves, due to its strength and broad acceptance. Despite this, some individuals are saying the USD can start losing its appeal to foreign governments, investors, and corporations, but is it true? Here is why it is not true.
The USD is currently used in about 60% of all global trade and almost 80% of global cross-border transactions. The remaining 40% of the transactions use the Euro, Japanese Yen, and the British Pound. The most commonly used materials and commodities are sold and purchased with USD. With emerging markets expanding and growing in the decades to come, so does the demand for commodities, which are traded using USD. This, in turn, will continue to strengthen the USD.
Over the past decade, the use of the Euro has risen to a certain extent, while other currencies such as the Japanese Yen staying stable and the British pound declining. World leaders, investors, and corporations all around the world still hold the USD in high regard and trust, while also having confidence in the United States government in its ability to continue to pay its debts without defaulting, rendering the USD useless.
The role of the USD in the world is tremendous, with every country having it in its reserves and the majority of trades use the USD. Sure, the value of the USD may increase and decrease depending on the economic times, but its strength and resilience remains constant. Its power, influence, and dominance on the global trade ensures the USD will remain strong for decades to come. When economic times are projected to be turbulent in the not so distant future, millions of individuals put their trust and confidence in the USD by exchanging their native currencies into the gold standard of currencies.
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