There is always a question in everyone’s mind that why US dollar is so powerful all around the world. Why not other countries currency hold that much grip in all other countries. What makes US dollar so special that every other country in the world priorities it.
We all know about US dollar. It is the official currency of United States of America and its territories. There are some other countries in the world who use it as their official currency. US dollar has another name to. It is also called as the world’s reserve currency. So now the question arrives that how Dollar became so powerful all around the world. What is the reason behind the success story of dollar. Why not other countries currency holds that much respect in international market.
Unites states currency is global currency:-
Actually, the official currency of United States of America is a globally accepted currency. It it that’s why called global currency. More than 1.8 trillion dollar of US currency is currently regulating in the international market. US dollar is called as global currency because it is kept by many other countries government in reserves.
One more important thing which is associated with US dollar is that it is quite trustful. Most people and companies trust it for international trade. As we all know the current situation of the world. Corona pandemic has affected everyone. Even as the corona virus pandemic wrecked havoc across global markets, wiping out trillions of dollars, worth of assets, still the US dollar was unaffected by the turmoil.
Why is US dollar so powerful?
United States official currency is strong because of the country’s economy. The powerfulness of any country’s currency is directly depend upon its economy. The dollar is so strong around the globe because of US economy and because people want to hold dollars and the safety of US dollars.
In tough times, investors form all around the world flee to what’s known as safe havens, investments expected to hold their value during market turbulence. And people see US currency as safest havens. Why? The currency comes from the world’s strongest and largest economy. United States of America, the country which is generally politically and economically stable.
Everybody understand that every currency fluctuates in tough time. But the good thing associated with US dollar that is doesn’t fluctuate the way Turkish Lira or Argentinian Peso have had.
America’s Central Bank, the federal reserve, is responsible for issuing the currency to anyone. The bank takes extra precautionary measure to prevent a squeeze when there is something like corona pandemic or economy crisis hits the world. For example during corona pandemic it set up any swap lines with other major central banks making sure there is enough money available for investment and spending.
How did US currency became world’s favorite currency?
Before the first world war British pound held the position which US currency experiences now. At that time developed economies tied their currencies to gold. However, during first world war many of those countries abandoned their gold reserve and started dealing with paper money. And the US dollar which was tied to gold, overtook the British pound to become world’s leading reserve currency.
To strengthen it’s currency more, US sold weapons to other countries during second world war and collected its payment in gold. By 1947, Unites States had accumulated 70% of world’s gold reserve.
In 1971, US president Richard Nixon gave shock to everyone when he de-linked Dollar from gold. Since then, free floating exchange rates were born. Despite periods of market volatility and the inflation has followed, US dollar has remained the world’s reserve currency.
United States currency is getting more stronger day by day:-
In present time, almost all international transaction are done with the help of US dollar. No other currency is in competition with US currency. People find it very safe to deal with United States currency. There are other currencies as well which comes from economically and politically stable countries. For example swiss Franc or the Singapore dollar. The truth is those countries have far less influence and economic power as compared to United States.
Around 60% world currency of foreign exchange reserves made up of US currency. Euro is just one third of US dollar standing upon 20%.
In recent times it has been seen that crypto currency such as bitcoin eventually overthrowing US dollar. But United states currency is so strong that is might not possible in one night to weaken it.
Will any country’s currency will able to overtake US dollar?
For now, it seems impossible. Taking over US dollar is dream for many other countries in the world. The reality is very sad. There is no currency in the world which is capable of standing against United states currency. Dollar is very strong. Countries like India is lagging very behind the dollar.
Catching up United States currency in upcoming years will be very difficult. First of all countries have to strengthen their gold reserve. As we told you world’s 70% gold reserve is with US currently. Amount of gold reserve tells the strength of the ang country economy. US dollar is now and will be most strongest currency in coming times.