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May

The Dollar Finance And Its Power

The dollar is the most popular currency rate in the world. The US dollar (USD) is currently the best-traded currency in the forex market. It is also possible to pair it with other major currencies. The USD can also be referred to colloquially as the dough, buck, greenback, dead presidents, paper, bones, etc. The Federal Reserve Bank is the US central bank.



Importance of the Dollar

The commodity market uses it as the standard currency. Since it is the most commonly converted currency globally, it is regularly used in the forex market to benchmark. Nearly every central bank in the world holds it since it is the most dominant. It has a direct impact on the prices of commodities.

Dollarization refers to the situation whereby other countries use the USD as a legal tender for exchange. Examples of these countries include the Panama and Ecuador. The dollar is internationally accepted. Other countries may choose to use the dollar as an alternative method of transaction. This makes most currencies to be pegged to the dollar.

History of the Dollar

The dollar officially came into use in the United States in 1785 as the official monetary unit. In 1792 the Coinage Act created the first US mint which was established as the federal monetary unit. A non-interesting demand bills bearing was released in 1861 by the US treasury. Also, the first ten-dollar bills that featured Abraham Lincoln was released and circulated. The name Greenbacks was born from these due to their color. Guidelines for national distribution were created in 1863 when the national banking system came into place. The banks were directed to distribute national currency that was gained from US bonds purchase. Consequently, the first ten-dollar notes were issued in 1914.

 

The dollar has been said to depreciate against the Euro according to Wald. He also added that the Federal Reserve might be less aggressive in the rates contrary to the anticipations of many. Marc Chandler, the global head of currency strategy, says that the euro’s strength against the dollar may continue. However, he added that he prefers American stocks to the European ones. 

The Dollar’s response to politics

The dollar may also be affected by the political environment. The USD has really diminished, and the risks are still increasing. The controversy surrounding President Donald Trump and Russia is also a big driver for the dollar’s decline. This scandal facing the White House has really diminished the rates of the dollar. Although Trump's reign has raised the stocks and made them great again, the Russian game is out to weigh down the Dollar and its yields. In June 2016, the dollar levels dropped to its lowest up to 2.1% Earnings drive the equity markets and investors don’t seem to really care about the impacts of the weaker dollar. In as much as a strong dollar is beneficial for multinational companies, a lower dollar is good for the stocks. We all hope for the best with regards to the dollar.

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