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Why Dollar Is Global Currency: After the Second World War, to stabilize international trade, a system was created that kept the dollar at the center. Today, from Europe to Asia and the Middle East, this currency is most needed for every big deal and investment. Understanding global dollar dominance is not just an effect of America’s power but a strong financial system works behind it. It is important for every investor and common citizen to understand the reasons why the dollar is the global currency in foreign trade and oil purchase.

beginning of dominance

After the Second World War, when most countries were facing serious economic crisis, America was in a very strong position. At the same time, a new international system was created keeping the dollar at the center to provide stability to global trade. Initially the dollar was linked to gold, which increased the unwavering trust of countries around the world in this currency.

safe investment option

Today, central banks around the world give the highest priority to the dollar in their foreign exchange reserves because it is quite safe. In times of crisis, the dollar proves to be the most easily used currency, hence it is considered safe globally. With time, due to a large part of loans and trade being done in this currency, it has now become a habit all over the world.

Role of the Federal Reserve

The decisions of the US central bank, the Federal Reserve, directly impact the markets around the world and the currencies of developing countries. Whenever interest rates rise in America, investors consider it safer to invest money there, which makes the dollar stronger. Even a small change by the Federal Reserve has the potential to affect global financial stability, which is a matter that everyone keeps an eye on.

oil and dollar relationship

A very big and important reason for the strength of the dollar is the huge trade of crude oil in the international market. Any country in the world needs dollars to buy oil because oil is paid in this currency. This special system has always maintained the global demand for the dollar and protected it from weakening in any major economic crisis.

trust is the greatest power

Experts believe that the real strength of the dollar lies in its stable system and global trust built over decades. Although in recent years many countries have been talking about alternative payment systems, but at present there is no strong alternative to the dollar. Even today the dollar has the largest share in global trade and investment, which is not at all easy to remove from the current system.