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Chapter 1, Part IV. FOREX Stats and numbers. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 14, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Pipruit: And why does the US dollar so greatly dominate in all FOREX transactions?​

    Commander in Pips: Well, this happened for historical reasons. The point is that after WWII, the European economy was ruined and the world needed some strong currency to rebuild international finance. Until the 70s, the US Dollar was tied to a “gold standard.” This meant that it could be exchanged for gold at a fixed rate without any limitations. The US economy was not heavily touched by war actions and was relatively strong. Due to these circumstances the US Dollar became an international “reserve currency” and the main currency that serves international trade. Even when the gold standard was cancelled, the dollar was already strongly spread through the world economy and continued to serve most international transactions. Not one other country has ever had a currency with similar qualities. So the dollar continues to stay on as the world reserve currency and still dominates in all international trade, because the majority goods are quoted, bought and sold for prices in US Dollars. There are some additional reasons why the US dollar strongly dominates over all the other currencies. The US has the largest economy and financial markets and a stable political system. The most important thing is that since the US currency is also a world’s reserve currency, this means that US dollars have no currency risk beyond normal changes in the exchange rates. Some countries have called for alternative reserve currencies, but those proposals haven’t ever gone very far.

    Here are some numbers for you. See, the USD continues to hold a leading position among other currencies. It means that almost every person, bank and organization has some assets in USD. That’s why it’s so important to pay attention to the value of the USD. Although the chart shows a growing share for the Euro in recent times, the USD still holds more than a 60% share of foreign reserves. So, the Buck is the Boss!


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