What is the strongest currency in the world

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, and is able to withstand global financial crises; As many people and international governments resort to preserving them during economic crises and turmoil; This is due to several economic reasons as follows:

• Banks and central banks in most countries of the world retain the US dollar as the largest unofficial global reserve currency, as the International Monetary Fund (IMF) statistics at the end of 2019 indicate that the US dollar constitutes approximately 60% of the total central bank 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 trading in US dollars around the world was estimated at $1,671 billion, and according to economic statistics in 2018, half of this trading was outside the American markets.
• stability in economic policies and the political climate in the United States of America; Which plays a major role in supporting the value of its currency.
• Considering US bonds issued by the US Treasury as a form of safe international debt; This is because it is trusted to be paid in full and on time, and according to the statistics of the International Monetary Fund at the end of 2019 AD, 40% of the total debts of countries in the world are issued in US dollars; Therefore, foreign banks tend to pump large sums of money in the US dollar; This makes it the most recoverable currency; In order to facilitate global trade business.

The dominance of the US dollar as the global reserve currency

The United States of America supported the Allied countries during World War II in exchange for gold. Which made it the largest holder of gold in the world at the time, and after the end of the war, many countries tended to link their local currency to the US dollar; Since that time, the US dollar has emerged as a global currency and has become the largest reserve currency in the world until now.

The Bretton Woods agreement had a prominent role in making the US dollar the largest reserve currency in the world; As representatives from 44 countries of the Allied countries met in the city of Bretton Woods in the state of New Hampshire in the United States of America in 1944 AD; In order to reach a new global financial system for the management of global foreign exchange, and following 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; Thus, the US dollar evolved from a local currency to a global reserve currency.

In the early seventies of the last century, the US government decided to stop pegging its currency to gold, after countries’ demands for gold increased in exchange for their US dollars. In an attempt to put an end to global financial inflation, bearing in mind that decoupling the US dollar from the gold standard led to the emergence of the so-called floating currency; That is, currency exchange rates are not fixed, but rather floating in a variable manner. Given the size and strength of the US economy and the dominance of US financial markets, the US dollar is still the largest reserve currency in the world despite its abandonment of the gold standard.

An introduction to the US dollar

The US dollar currency is referred to as the global symbol (USD) or the formal symbol ($) or (US$), knowing that one US dollar is divided into 100 cents, and the US dollar was issued in the financial markets in its current form for the first time in 1914 AD, and a bank is The Federal Reserve is the entity responsible for issuing US dollar banknotes and coins, which are currently available in the form of seven paper denominations: 1, 2, 5, 10, 20, 50, and 100 dollars, while a different set of dollar denominations is issued. Its parts are in the form of metal coins for daily circulation in various commercial transactions in the form of six metal denominations: one cent, 5 cents, 10 cents, a quarter of a dollar (25 cents), a half dollar (50 cents), and one dollar.

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 it is the most used national currency in the North American continent; It is officially circulated in most countries of the continent, as well as in some countries and territories of the Caribbean and Central America, where five American territories and seven independent countries use the US dollar as their official currency, namely: Ecuador, the Republic of East Timor, El Salvador, the 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 volume of trading in the Forex market for foreign currencies, 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 AD amounted to approximately $2.9 trillion, noting that the forex market is the largest financial market in the world; The total average daily trading volume is estimated at approximately $6.6 trillion.