International use of the U.S. dollar
The
The US dollar is widely held by central banks, foreign companies and private individuals worldwide, in the form of eurodollar foreign deposit accounts (not to be confused with the euro), as well as in the form of US$100 notes, an estimated 75% of which are held overseas.[1] The US dollar is predominantly the standard currency unit in which goods are quoted and traded, and with which payments are settled in, in the global commodity markets.[2]
The US dollar is also the official currency in several countries and the de facto currency in many others, with
The
Ascendancy
The primary currency used for trade around the world, between Europe, Asia and the Americas had historically been the Spanish-American silver dollar, which created a global silver standard system from the 16th to 19th centuries, due to abundant silver supplies in Spanish America.[3] The US dollar itself was derived from this coin. The Spanish dollar was later displaced by sterling in the advent of the international gold standard in the last quarter of the 19th century.
The
International reserve currency
The US dollar is joined by the world's other major currencies – the euro, sterling, Japanese yen and Chinese renminbi – in the currency basket of the Special drawing rights of the International Monetary Fund. Central banks worldwide have huge reserves of US dollars in their holdings, and are significant buyers of US treasury bills and notes.[6]
Foreign companies, entities and private individuals hold US dollars in foreign deposit accounts called
The
Economist
In August 2007, two scholars affiliated with the government of the People's Republic of China threatened to sell its substantial reserves in American dollars in response to American legislative discussion of trade sanctions designed to revalue the
After the
The percental composition of currencies of official foreign exchange reserves from 1995 to 2022.[13][14][15]
Graphs are unavailable due to technical issues. There is more info on Phabricator and on MediaWiki.org. |
In the global markets
The
The
US Dollar Index
The
Currency | Relative value of other currency |
---|---|
Euro | 57.6% |
Japanese yen | 13.6% |
Sterling | 11.9% |
Canadian dollar | 9.1% |
Swedish krona | 4.2% |
Swiss franc | 3.6% |
The Index is described by the ICE as "a geometrically-averaged calculation of six currencies weighted against the U.S. dollar."[18] The baseline of 100.00 on the USDX was set at its launch in March 1973. This event marks the watershed between the wider margins arrangement of the Smithsonian regime and the period of generalized floating that led up to the Second Amendment of the Articles of Agreement of the International Monetary Fund. Since 1973, the USDX has climbed as high as the 160s and drifted as low as the 70s.
The USDX has not been updated to reflect new trading realities in the global economy, where the bulk of trade has shifted strongly towards new partners like China and Mexico and oil-exporting countries while the United States has de-industrialized.
Dollarization and fixed exchange rates
Other nations besides the
The US dollar is an official currency in
Some countries that have adopted the US dollar issue their own coins: See
Some other countries link their currency to US dollar at a
The
Several countries use a crawling peg model, wherein currency is devalued at a fixed rate relative to the dollar. For example, the Nicaraguan córdoba is devalued by 5% per annum.[23]
In some countries, such as Costa Rica and Honduras, the US dollar is commonly accepted, although not officially regarded as legal tender. In Mexico's northern border area and major tourist zones, it is accepted as if it were a second legal currency. Many Canadian merchants close to the border, as well as large stores in big cities and major tourist hotspots in Peru also accept US dollars, though usually at a value that favours the merchant. In Cambodia, US notes circulate freely and are preferred over the Cambodian riel for large purchases,[26][27] with the riel used for change to break 1 USD. After the U.S. invasion of Afghanistan, US dollars were accepted as if legal tender, but in 2021 the Taliban government banned the use of foreign currencies.[28]
Dollar versus euro
Year | Highest ↑ | Lowest ↓ | ||||
---|---|---|---|---|---|---|
Date | Rate | Date | Rate | |||
1999 | 03 Dec | €0.9985 | 05 Jan | €0.8482 | ||
2000 | 26 Oct | €1.2118 | 06 Jan | €0.9626 | ||
2001 | 06 Jul | €1.1927 | 05 Jan | €1.0477 | ||
2002 | 28 Jan | €1.1658 | 31 Dec | €0.9536 | ||
2003 | 08 Jan | €0.9637 | 31 Dec | €0.7918 | ||
2004 | 14 May | €0.8473 | 28 Dec | €0.7335 | ||
2005 | 15 Nov | €0.8571 | 03 Jan | €0.7404 | ||
2006 | 02 Jan | €0.8456 | 05 Dec | €0.7501 | ||
2007 | 12 Jan | €0.7756 | 27 Nov | €0.6723 | ||
2008 | 27 Oct | €0.8026 | 15 Jul | €0.6254 | ||
2009 | 04 Mar | €0.7965 | 03 Dec | €0.6614 | ||
2010 | 08 Jun | €0.8374 | 13 Jan | €0.6867 | ||
2011 | 10 Jan | €0.7750 | 29 Apr | €0.6737 | ||
2012 | 24 Jul | €0.8272 | 28 Feb | €0.7433 | ||
2013 | 27 Mar | €0.7832 | 27 Dec | €0.7239 | ||
2014 | 31 Dec | €0.8237 | 8 May | €0.7167 | ||
2015 | 13 Apr | €0.9477 | 2 Jan | €0.8304 | ||
Source: Euro exchange rates in USD, ECB |
Not long after the introduction of the euro (€; ISO 4217 code EUR) as a cash currency in 2002, the dollar began to depreciate steadily in value, as it did against other major currencies. From 2003 to 2005, this depreciation continued, reflecting a widening current account deficit. Although the current account deficit began to stabilize in 2006 and 2007, depreciation persisted. The fallout from the subprime mortgage crisis in 2008 prompted the Federal Reserve to lower interest rates in September 2007,[29] and again in March 2008,[30] sending the euro to a record high of $1.6038, reached in July 2008. [31] In addition to the trade deficit, the U.S. dollar's decline was linked to a variety of other factors, including a major spike in oil prices.[32]
However, a sharp turnaround began in late 2008 with the onset of the
Chinese-issued U.S. dollar bonds
The issuance of U.S dollar-denominated bond issued by Chinese institutions doubled to $214 billion in 2017 as tighter domestic regulations and market conditions saw Chinese companies look offshore to conduct their fund-raising initiatives. This has far outpaced many of the other major foreign currency bonds issued in Asia in the last few years.
The anticipated continuation of a prudent monetary policy in China to curb financial risks and asset bubbles, along with the expectation of a stronger yuan will likely see Chinese companies to continue to issue U.S. dollar bonds.[35]
Major issuers of U.S. dollar denominated bonds have included Tencent Holdings Limited, Industrial and Commercial Bank of China Limited and
U.S dollar-denominated bond issued by Chinese institutions has also been referred to as "
See also
- Reserve currency
- Dollarization and Dedollarisation
- Internationalization of the renminbi
- International status and usage of the euro
- List of the largest trading partners of the United States
References
- ^ "The Death of Cash? Not So Fast: Demand for U.S. Currency at Home and Abroad, 1990-2016" (PDF). www.econstor.eu/. 2017-05-25. p. 8. Retrieved 2017-05-25.
- ^ a b Kowalski, Chuck (February 11, 2020). "Impact of the Dollar on Commodities Prices". The Balance.
- ^ Babones, Salvatore (April 30, 2017). "'The Silver Way' Explains How the Old Mexican Dollar Changed the World". The National Interest.
- S2CID 154773110.
- ^ Amadeo, Kimberly (September 3, 2020). "How a 1944 Agreement Created a New World Order". The Balance.
- ^ "Major foreign holders of U.S. treasury securities 2021". Statista.
- ^ "SWIFT oversight". SWIFT - The global provider of secure financial messaging services.
- ^ "Sanctions Programs and Country Information". U.S. Department of the Treasury.
- ^ "China, U.S. should adjust approach to economic growth". English.people.com.cn. 2005-12-26. Retrieved 2010-08-24.
- ^ Evans-Pritchard, Ambrose (2007-08-08). "China threatens 'nuclear option' of dollar sales". The Daily Telegraph. London. Archived from the original on 2007-08-09. Retrieved September 26, 2007.
- ^ Chris Buckley (2008-09-17). "China paper urges new currency order after "financial tsunami"". Reuters. Retrieved 2009-09-18.
- ^ "Reuters". Euro could replace dollar as top currency - Greenspan. 2007-09-17. Retrieved September 17, 2007.
- ^ For 1995–99, 2006–22: "Currency Composition of Official Foreign Exchange Reserves (COFER)". Washington, DC: International Monetary Fund. April 3, 2023.
- ISSN 1725-6534(online).
- ISSN 1725-6593(online).
- ^ Chen, James (May 17, 2021). "Dollar Bond". Investopedia.
- ^ "The dollar's international role: An "exorbitant privilege"?". 30 November 2001.
- ^ a b "The ICE U.S. Dollar Index and US Dollar Index Futures Contracts US Dollar Index" (PDF). June 2012. p. 2. Retrieved 5 October 2012.
- ^ "Introduction of the US dollar on Bonaire, St Eustatius and Saba". sxmislandtime.com. 26 May 2010. Retrieved 2010-10-22.
- ^ "US dollar introduced in Dutch Caribbean islands". Radio Netherlands Worldwide. 1 Jan 2011. Retrieved 2011-01-02.
- ^ "Lebanon devalues official exchange rate by 90%". Reuters. February 1, 2023. Retrieved February 3, 2023.
- ^ "Kuwait pegs dinar to basket of currencies". Forbes. 2007-05-20. Archived from the original on November 10, 2007. Retrieved 2007-06-06.
- ^ Rogers, Tim (May 13, 2014). "Nicaragua seeks to de-dollarize economy". The Nicaragua Dispatch.
- ^ "New exchange rate will make Belarusian exports competitive, NBRB vows". State Customs Committee of the Republic of Belarus. 2009-01-06. Archived from the original on 2012-03-23. Retrieved 2009-01-24.
- ^ "Belarusian rouble falls sharply in value". BBC News. 2011-09-14.
- ^ Chinese University of Hong Kong. "Historical Exchange Rate Regime of Asian Countries: Cambodia". Archived from the original on 2006-12-08. Retrieved 2007-02-21.
- ^ Kurt Schuler. "Tables of Modern Monetary History: Asia". Archived from the original on 2007-02-19. Retrieved 2007-02-21.
The U.S. dollar also circulates freely
- ^ "Taliban bans foreign currencies in Afghanistan". BBC News. 3 November 2021.
- ^ "ECB: euro exchange rates USD". Ecb.int. Retrieved 2010-08-24.
- ^ "Dollar Falls to Record Low Versus Euro as Fed Signals Rate Cuts". Bloomberg. 2008-03-01.
- ^ a b Worrachate, Anchalee; Seki, Yasuhiko (2008-06-01). "Euro Weakens on Concerns Over Europe Spending Cuts". Bloomberg.
- ^ "Oil Rises to Record on Weakening Dollar, Morgan Stanley Outlook". Bloomberg. 2008-06-06.
- ^ David Gaffen (2008-10-22). "Somehow, the Dollar Regains Safe-Haven Status". The Wall Street Journal. Retrieved October 22, 2008.
- ^ Levisohn, Ben; Worrachate, Anchalee (2008-06-10). "Euro Climbs Most Versus Dollar in Two Weeks on Outlook for Global Growth". Bloomberg.
- ^ Li Xiang (2018-01-03). "Sales of bonds look set to rise this year". China Daily. Retrieved 2018-11-27.
- ^ Karen Yeung (2017-10-11). "China to sell first dollar bond in 13 years in Hong Kong to set benchmark for Chinese issuers". South China Morning Post. Retrieved 2018-11-27.
- ^ Manju Dalal (2018-01-12). "Tencent Joins Asia-Tech Debt Rush With Its Biggest Bond Sale". The Wall Street Journal. Retrieved 2018-11-27.
- ^ Ishika Mookerjee (2018-04-04). "'Kung Fu' bonds grab investor attention". Citywire Asia. Retrieved 2018-11-27.
- ^ Ee Chuan Ng (2018-04-13). "'Gongfu bonds become bright spot with Asian investors as Chinese US$ bonds take off". The Business Times. Retrieved 2018-11-27.
- ^ Vicky Wei, Andrew Cheung, Wenwen Zhang (2018-04-19). "'Baidu, Tencent sales give Kungfu bonds a hi-tech kick in 2018". Bloomberg Professional Services. Retrieved 2018-11-27.
{{cite news}}
: CS1 maint: multiple names: authors list (link)