Today, the USA dollar is the world’s reserve currency and one of the most dominating currencies in the globe, along with the Pound Sterling, the Euro, the Japanese Yen, and the Swiss Franc. The reserve currency of the world is used for the settlement of international transactions in the trading markets. It also serves as a benchmark for fixing the costs of commodities in the global trade markets.
Kavan Choksi speaks about the history of the US dollar
Business and finance expert Kavan Choksi states that in the past, gold and silver were predominantly used for international trade and commerce. They were used for several centuries, and it was in 1944 that global leaders from 44 allied nations met at The Bretton Woods Conference to establish a fixed exchange rate of major currencies that were pegged to the dollar. This meant that governments, instead of holding gold or silver in their national reserves, would save US dollars instead as the global reserve currency.
During that time, gold could be converted into $35 for every ounce. The US dollar was chosen primarily because after the end of the Second World War, the economy of the USA was not devastated, unlike its peers like Germany and Japan. It still had large amounts of gold and became the central hub for international trade and commerce.
1Where does the US dollar stand in the world today?
After the end of the Second World War, the USA accounted for almost 50% of the economic output in the free world. It was during this time that America started its old interventionist foreign policy across Europe.
The nations of this continent were in chaos or under the pressure of communist control. The USA had the mission to rebuild Europe and deter the Soviet forces from starting another Third World War, so it maintained its strong military presence in Europe. It incorporated the Marshall Plan with this objective. Moreover, the assets that were denominated by the dollar were safe during this time, while the rest of the world was crumbling under political pressures and unrest.
Reasons for the supremacy of the US Dollar
If you closely examine the US dollar today, you will find its index is standing at a multi-year high. There are many reasons that contribute to the status of the dollar in the world, with the main one being the tapering policy of The Federal Reserve. This policy refers to the policy of reducing the inflow of accessible funds into the global market. This move started in 2013 when Ben Bernanke began speaking about the reduction of asset purchases since he took up office in 2006.
According to finance and business specialist Kavan Choksi, the Federal Reserve purchased $1.7 trillion in assets to trigger growth in the economy, manage the low rates of interest, and boost cash liquidity in the international market.
The US Dollar is a dominant currency in the world, and it is likely to appreciate new highs in the future. There are several ways for one to invest in the US Dollar, and an effective way is to buy EFTs dominated in USD, bonds, and stocks.
