US dollar is the most popular currency in the world. The value of the dollar can be defined by the fact that the value of the currency of a country is determined by comparing it to the US dollar. Other currencies are used for exchange only on local levels. In global markets, the dollar has the highest value among all, which is accepted everywhere for trade on the international level. Not only this, the US dollar owns the most important position as the common acceptable currency in the world due to the following reasons as well:
- Most of the central banks of countries hold their foreign currency reserves in US dollars. A sufficient amount of these reserves are very important for the economy of a country.
- About 40% of the debt that is issued in the world is in US dollars. Which means to service these debts, countries need a lot of US dollars.
- US dollar rules in the foreign exchange market which involves 90% of dollar foreign exchange trade.
- Due to the fact that the US is the largest export partner, countries like Japan and China keep their currency cheaper so that their exports could be competitively priced.
- The countries who peg their currencies to dollar shares about more than 1/3 of the world’s gross domestic product.