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Kavan Choksi- Understanding The US Dollar As The Reserve Currency of the World

Monday, November 28, 2022

 


The US dollar is one of the strongest currencies on the globe today. It is the national currency of the USA and several other nations worldwide. The first dollar currency bill was first printed in 1914. After decades, the US dollar became the global reserve currency, and different countries started pegging their currencies against it. This took place after World War I. The International Monetary Fund, or the IMF, also stated that about 59% of foreign reserves are denominated in US dollars in different banks worldwide. Today, despite the accepted position and the value of the US dollar in the international market, it is not the most potent currency globally. It is placed at the 1oth position regarding the strongest currency in the world list. 

 

Kavan Choksi – an insight into the gold standard of the US dollar 

 

Business and finance expert Kavan Choksi states that under the Federal Reserve Act of 1913, the currency system was quite unstable during that time were made organized. The Federal Reserve had to respond to this unstable currency system, and so many banknotes of different countries were pegged to gold so that the currency exchange rates could be stabilized. It was at the same time that the economy of the USA surpassed the economy of the UK to become the largest in the world. 

 

After the outbreak of the First World War, several nations began to suspend the use of the gold standard for payments of military costs, and they were replaced with paper money. This led to the other currencies becoming evaluated at a much larger value, with the exception of the UK, which retained the gold standard for maintaining its position as its primary currency across the world, and it borrowed cash for the first time during the First World War In this way, the USA became the lender of choice for several nations that wanted to purchase US dollar bonds. It was at this time that the US dollar started to replace the UK pound sterling as the global reserve currency. 

 

The status of the US dollar today 

 

As mentioned above, the US dollar stayed as the globe’s reserve currency after the First World War. Central Banks of different countries today hold 59% of their reserves in US dollars, according to the IMF. The debts that are denominated in US dollars still continue to grow, and as per the latest statistics taken in 2020, it stands at about $12.6 trillion. As per the statistics released by the CMC Market Report, the US dollar holds the 10th strongest position in the globe today. 

 

According to Kavan Choksi, the reserve status of the dollar is based on how strong the US dollar is and its dominance in the financial markets in the nation. Despite being the biggest spender, there are still trillions of US dollars in the tertiary security of the country, which is considered to be one of the safest ways to store currency. 

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