When it comes to finance, currency is one of the most important aspects of the field. Depending on the economic situation around the world, different currencies have different monetary values. The dollar is one of the strongest currencies in the world. It dictates the monetary value of other currencies around the world and in turn the fluctuating prices of different commodities across the globe. The dollar affects the financial sector of the whole world. Commodity prices across the world are stated in dollars. Oil prices are given in dollars and converted into individual national currencies. One thing is clear the dollar is very important in finance. There are a number of reasons which make this a possibility
1. The super stable economic nature of the United States
America is one of the most stable countries in the world in terms of the economy. Its economy is diversified and there isn’t much reliance on imported products or one aspect of the economy. This means that the economy is self-sustaining and a balance is present at all times hence ensuring that the value of the dollar remains stable at all times.
2. The super stable political nature of the United States of America
The checks and balances that have been put in place in the United States of America ensure that the political climate of the country is always conducive for the economy which in turn ensures that the economy continues to run hence giving the dollar the stability it needs to remain a viable currency throughout.
3. The dependence of many countries around the world on the United States of America
Being a superpower many countries all over the world depend on the United States. The dependence is in several respects such as loans to financial institutions based in foreign countries, grants to third world countries or exports which are sourced from different parts of the United States of America. The dependence is not only limited to third world countries but also international bodies such as the United Nations which depends on the United States for contributions to ensure the body keeps on running. This dependence in the form of finances on the part of the United States of America is given out in the form of American dollars which means the dollar spreads far and wide across the world.
4. The acceptable nature of the dollar in world finance
The dollar is one of the most acceptable currencies across the world given the preceding reasons of stability of the political and economic aspects of the United States. This gives the dollar appeal and strength such that in some areas of the world only the American Dollar holds any real value. Countries such as Zimbabwe have their own currency but it is almost worthless given its extremely low value and the various problems plaguing the country. It is therefore not a surprise that most individuals living in the country find it safer and convenient to carry out their transactions using American Dollars as opposed to the local currency.
The dollar is indeed a big player in the world of finance.