04 July 2016
A world or global currency is one that is accepted for all trade throughout the world. Some of the world's currencies -- the US Dollar, the Euro and the Yen -- are accepted for most international transactions. Of these, by far, the U.S. dollar is the most widely used. However, there is no official global currency. Instead, the world has 185 currencies. Most of these currencies are only used inside their own countries.
The US Dollar is the strongest World Currency The relative strength of the U.S. economy means that its currency, the dollar, is the most powerful in the world. Around $580 billion in U.S. bills were being used outside the country. That's 65% of all dollar-denominated bills, including 75% of $100 bills, 55% of $50 bills, and 60% of $20 bills. Most of these bills are being used in the former Soviet Union countries and in Latin America. (Source: Federal Reserve Bank of New York, January 2010)
Why the Dollar Is the Highest Currency in the World Why the Dollar is the Highest Currency in the World? The dollar became the highest currency in the world thanks to the 1944 Bretton Woods agreement. Before then, most countries were on the gold standard. Their governments promised to redeem their currencies for their value in gold upon demand. The world's developed countries met at Bretton Woods, New Hampshire, to peg the rate of exchange for all foreign currencies to the U.S. dollar. At that time, the dollar was backed by its value in gold, and the U.S. held the largest gold reserves. This allowed other countries to back their currencies with dollars, rather than gold. By the early 1970s, countries began demanding gold for the dollars they held to combat inflation. Rather than allow Fort Knox to be depleted of all gold reserves, President Nixon untied the dollar to gold. By that time, the dollar had already become the world's dominant reserve currency.
The next closest reserve currency is the euro. Only 25% of central bank foreign currency reserves were in euros as of the first quarter 2012. This is down from the second quarter 2011, when 26.7% were in euros. The chance of the euro becoming a world currency grows slimmer as the Eurozone crisis continues. In fact, the difficulties of having a world currency shared by different countries is highlighted by the Eurozone struggles. (Source: IMF) A world or global currency is one that is accepted for all trade throughout the world. Some of the world's currencies -- the US Dollar, the Euro and the Yen -- are accepted for most international transactions. Of these, by far, the U.S. dollar is the most widely used. However, there is no official global currency. Instead, the world has 185 currencies. Most of these currencies are only used inside their own countries.
The US Dollar is the strongest World Currency The relative strength of the U.S. economy means that its currency, the dollar, is the most powerful in the world. Around $580 billion in U.S. bills were being used outside the country. That's 65% of all dollar-denominated bills, including 75% of $100 bills, 55% of $50 bills, and 60% of $20 bills. Most of these bills are being used in the former Soviet Union countries and in Latin America. (Source: Federal Reserve Bank of New York, January 2010)
Why the Dollar is the Highest Currency in the World? The dollar became the highest currency in the world thanks to the 1944 Bretton Woods agreement. Before then, most countries were on the gold standard. Their governments promised to redeem their currencies for their value in gold upon demand. The world's developed countries met at Bretton Woods, New Hampshire, to peg the rate of exchange for all foreign currencies to the U.S. dollar. At that time, the dollar was backed by its value in gold, and the U.S. held the largest gold reserves. This allowed other countries to back their currencies with dollars, rather than gold. By the early 1970s, countries began demanding gold for the dollars they held to combat inflation. Rather than allow Fort Knox to be depleted of all gold reserves, President Nixon untied the dollar to gold. By that time, the dollar had already become the world's dominant reserve currency.
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