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What is the strongest currency in the world?

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The US dollar is the strongest currency in the world

The US dollar is considered the strongest currency in the world, that is, the most stable global currency, capable of withstanding global financial crises; Many international people and governments resort to supporting them in times of economic crisis and turmoil; This is for a number of economic reasons, as follows:

  • Banks and central banks in most countries in the world hold the US dollar as the largest unofficial global reserve currency, as statistics from the International Monetary Fund (IMF) at the end of 2019 indicate that the US dollar constitutes approximately 60% of the central bank's total reserves. of known foreign currencies.
  • Trading and trading in US dollars is not only limited to financial transactions in the United States of America, but the US dollar is characterized by its ability to trade in all parts of the world, especially in the countries of the former Soviet Union. and the countries of the Latin American continent; Note that the volume of US dollar transactions worldwide was estimated at $ 1.671 billion, and based on 2018 economic statistics, half of these transactions were made outside of US markets.
  • Stability in economic policies and the political climate in the United States of America; Which plays an important role in supporting the value of your currency.
  • Considering US bonds issued by the US Treasury as a form of safe international debt; This is because it relies on a full and timely repayment According to statistics from the International Monetary Fund at the end of 2019, 40% of the world's total debt is issued in US dollars; For this reason, foreign banks tend to inject large amounts of currency in US dollars; This makes it the most redeemable currency; In order to facilitate the work of world trade.

The dominance of the US dollar as a world reserve currency

The United States of America supported the allied countries during World War II in exchange for gold; Which made it the largest gold holder in the world at the time, and after the war ended, many countries tended to peg their local currency to the US dollar; Since then, the US dollar has become a world currency and has become the world's largest reserve currency so far.

The Bretton Woods Agreement was instrumental in making the US dollar the world's largest reserve currency; Representatives from 44 of the allied countries met at Bretton Woods, New Hampshire, USA in AD 1944; In order to achieve a new global financial system for the management of global currencies, and as a result of this agreement, it was decided to stop linking the currencies of the countries of the world to gold and to link them to the US dollar linked to gold; Therefore, the US dollar went from being a local currency to a global reserve currency.

In the early 1970s, the United States government decided to stop pegging its currency to gold, after countries increased their demands for gold in exchange for what they owned in US dollars; In this way, an attempt to put an end to global financial inflation, taking into account that the disconnection of the US dollar from the gold standard led to the emergence of the so-called floating of the currency; That is, the exchange rates of currencies are not fixed, but float in a changing way. Given the size and strength of the US economy and the dominance of US financial markets, the US dollar remains the largest reserve currency in the country. the world despite its abandonment of the gold standard.

Introduction to the US dollar

The currency of the US dollar is abbreviated with the global symbol (USD) or with the formal symbol ($) or ($ US), taking into account that a US dollar is divided into 100 cents, [4] and the US dollar was issued in the markets in its present form for the first time in 1914 AD [3] The Federal Reserve Bank is responsible for issuing the US dollar bills and coins, which are currently available in seven denominations, namely: 1, 2, 5, 10, 20, 50, and $ 100. Issuance of a different set of dollar denominations and their parts in the form of metallic coins for daily circulation in various business transactions in the form of six metallic denominations, which are: one cent, 5 cents, 10 cents, one quarter (25 cents), half dollar (50 cents) and the dollar the one.

Countries that adopt the US dollar as their official currency

The US dollar is the official national currency in the United States of America and is the most widely used national currency on the North American continent; It is officially marketed in most countries of the continent, as well as in some countries and territories of the Caribbean and Central America, where five United States territories and seven independent countries take the United States dollar as their official currency, namely: Ecuador, Republic of East Timor , El Salvador, Marshall Islands and Micronesia, Palau and Zimbabwe.

It should be noted that the US dollar is the most traded currency in the world, according to the trading volume in the Forex currency market, according to the statistics of the Bank for International Settlements for the year 2019 AD; Which indicates that the average daily trading volume of the US dollar for the year 2019 amounted to approximately $ 2.9 trillion, pointing out that the foreign exchange market is the largest financial market in the world; Its total average daily trading volume is estimated at approximately $ 6.6 trillion.