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  • Category: Finance and Investments

    Why the currency 'Dollar' is acceptable all over the world?


    Ever wondered why dollar is the most acceptable currency in the world? Looking out for the reasons behind this acceptability? Find the responses from experts to yuor question here.

    When people go to other countries they exchange their currency either in the currency of their destination country or in Dollars which is the currency of US. Different places, different currencies are preferred but Dollar is accepted everywhere and it is one of the reasons why frequent international travellers keep this prestigious currency with them.

    There are many powerful countries in the world in terms of trade and commerce or per capita income or GDP but their currencies are not preferred the way Dollar is treated.

    I want to know that what are the reasons for this popularity and acceptance of Dollar?
  • #151218
    The dollar is the currency of the world's biggest economy which is worth twelve millions of million dollars.
    It is a known fact that larger markets are generally more stable than smaller ones.
    Another major reason for the US dollar's supremacy as an international currency is the fact that the
    vast majority of recourses and raw materials are denominated in US dollars.
    A necessary requirement for an international currency is the relative stability of its value, as it is also used as a form in which to hold assets. Therein there must be trust that the value of the currency will not fluctuate excessively and show considerable stability. In particular, it is crucial that there is sufficient confidence that its value will not be inflated away in the future.
    An international currency derives its value because others are using it, which is a typical case of network externalities.
    As the dollar market is the highest in the world and the economy of US is supposed to be strongest and the value of dollar never declines. This is the reason for accepting the dollar is acceptable all over the world.

    drrao
    always confident

  • #151220
    US is the greatest economy and a developed nation. It has a fairly free trade conditions. US is a great consumer. Almost all countries trade with US mostly as sellers and US is the buyer. The economy of other countries are influenced by their trade with US. Being a large buyer, US can command and dictate terms to its suppliers. If US stops buying then many country's economy may suffer suddenly. Politically and militarily also US was in command.
    All these made US currency-the USD- a powerful and sought after one. To facilitate trade and also as a safe investment,any countries invested in US. As almost all countries traded with US, USD was acceptable to most countries as the instrument for international trade.
    As the value and strength of a currency depends on that country's economy, the demand for it etc .Hence USD remained a strong currency and so the most sought after currency for international trade. The value of other currencies in the international market came to be stated by its exchangeable value with USD.
    After USD other European currencies are also used in international trade, but it is still easy to deal international trades in USD.

  • #151222
    There are too many reasons for it in terms of trade and business. Main reason is U.S. imports a lot of goods from trading partners overseas, which it pays for with foreign currencies. Since Dollar become stronger because of overseas sell of patent products which are costly. Now stronger U.S. dollar makes imported goods cheaper, putting downward pressure on inflation and providing support for consumer spending on imported goods.
    Going back to other reasons which are absolutely true are
    1. US is strongest country in world in terms of defense and business.
    2. Country has dominance of their products in all continents.
    3. Their Citizens allowed on arrival VISA in 90% of world countries and most countries don't need VISA also due to bilateral relationship.
    Other stronger countries have create their own policies for use of currencies which restrict them during international use. There are more reasons but right now it is fact that unless your country wanted it is not possible to have currency ease of use so easily.

    Avi
    Life Is Beautiful

  • #151254
    The citizens of United States consume the most in the world. To be honest, they are the ones who keep demand and supply in check around the world. Though that seems like a overstatement, it is not. US by itself, lack many resources and has to import a lots of goods. Which means a lot of foreign relations. US has tremendous business organisations like OPEC, Chiquita Brands international, Microsoft etc. .; These organizations are moguls of monopoly. They control the trading of their goods around the world.
    And also US has been having a stable economy. Since it was a mogul in monopolies, currencies were always compared with dollar, because need I tell, even Wall Street is in US.
    So I think the stock market and the monopolies have to do with this international dollar fandom.

    The stronger a light shines the darker are the shadows around it.

  • #151269
    A. Everyone thinks the US currency dollar is so powerful and the country is so powerful and hence 'Dollar' is the global bench mark. This is not true entirely. Consider yourself, going anywhere in India, you can live, buy and sell etc because we have a single currency that is accepted in all states.

    B.Now, enlarge the picture to the global scale, the world needed a system of exchange that can be agreed by others so that it is easy to buy,sell,lend,borrow and basically do everything you do at a much large scale.

    C.It all looks easy now, but if you wind the clock back to the period around the world war II, a significant milestone was achieved at the 'UNITED NATIONAL MONETARY AND FINANCIAL CONFERENCE' at Bretton Woods, New Hampshire ( 1st-22nd July 1944).

    At this meeting, the world leaders decided to equate the currency of a country to the price of gold. In this situation, the US dollar became the resevre currency linked to the price of gold.

    D. It is widely felt that Harry Dexter White, the chief international economist of the Treasury Department, out performed his counterpart(Mr.John Maynard Keynes) from UK. The Bretton Woods system came into vogue in 1958, where in suddenly all the world's currencies became 'convertible'. Every trading nation started converting, managing and settling it's trade accounts in US dollars and US dollars in turn were fully convertible to gold.

    E. At the same time, the Bretton Woods agreement paved the way for the origin of 'INTERNATIONAL MONETARY FUND'(to lend the reserve currency- dollar to other nations in need) AND 'WORLD BANK GROUP' ( to provide financial assistance to the countries to re-shape the economy after the world war). Both these large organisations dealt with US dollars for helping the needy nations.

    F. This, along with the good industrial growth, huge gold reserves and growing economy of USA in the post war period, led to the phenomenal raise of the power of the US dollar. SO much so that the strong dollar led to the collapse of the Bretton Woods agreement and unofficially the dollar replaced gold. This was also aided by the fact the combined growth of the world's economy outgrew the supply or reserve of gold.

    G. So, USA with a strong economy, vast gold reserves, being a super-power and a world class military led the way for the US dollar to become popular and acceptable world over.

  • #151288
    I think there are lot of reasons behind it. US being the political leader and also the dominant figure in the export and import world used their own currency against the forex market to decide the price for the oil. So that became pattern for the currency valuation. It was since the days of the oil pricing in international market.

    Another reason being the political where most of the nations that US has invaded in the name of democracy was forced to accept USD. And some places where US outsourced the work has made it compulsory to accept the currency. In war prone areas USD is not accepted. And in future this may change as well.


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