Question

In: Finance

The U.S. Dollar has been the benchmark world currency for many decades. Do you believe the...

The U.S. Dollar has been the benchmark world currency for many decades. Do you believe the dollar will still be the benckmark currency 30 years from now?

Solutions

Expert Solution

Yes, i believe that US dollar will be the reserve currency 30 years from now.

There are lot of logic that supports this belief. Another name for international currency can be reserve currency. A currency becomes reserve currency only after it wins the trust of the holding nation. The nation holding the reserve currency has got full faith in the issuing country that when the holding country goes for conversion of its reserve currency to any other currency it will be honored. According to the balance.com, US dollar is the most widely used international currency accounting for around 64% of foreign reserves of central banks of the countries.

There are a total of 185 currencies in the world according to international organizations standards list, but they are transacted within their own country only. The reason for the trust in the US dollar stems from the relative strength and growth of the US economy. Close to 580 US Bn dollars are used outside the US country.

Further, the dollar has been the most active currency with regards to coming out of depression or slow down as compared to the Euro and therefore it continues to hold the trust for the international countries. As per the balance.com, close to 85% of the foreign exchange transaction is done in dollar. all these above strongly support the role of dollar as a global currency.


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