Why the dollar is the world reference currency and how it was decided

The impact that the dollar volatility it is felt in the different markets of the world. Why? The currency is the world reference for many transactions between countries, companies and others.

(Read: Elon Musk “backs down” with Twitter purchase).

According to Juan Eduardo Nates, senior foreign exchange associate at Credicorp Capital, this is because, during World War II, many countries were indebted to the United States, as they received its help during the conflict.

At that momentthe Federal Reserve (FED, the central bank) was left with the largest gold reserve in the world. As the base currency was gold, there came a time when countries began to borrow from the United States and ran out of gold, so they began to buy dollars to pay it.

The expert explains that from there the countries began to adopt in their reserve the dollars and to pay the debt with this currency.

However, the currency has remained a world benchmark due to the strength of the economy that issues it, according to Jeisson Balaguera, executive director of Values ​​AAA.

“The countries where currencies are issued are places that are considered low risk for investment because they are countries that pay their debts or do not have them. They are politically stable, without abrupt changes in governments and other“, Explain.

In this sense, USA It is considered a strong economy as it is the largest in the world. “When the currency has such a high backing, it makes it become a currency and an international reference for transactions, because in any country it has an important value because of its issuer,” Balaguera points out.

Both experts agree that cryptocurrencies They are a start for this transformation. However, it is a process that depends on central banks, according to Nates.

(Also: Is the dollar’s bull run due to the current political situation in the country?).

For Balaguera, it will depend on the economic situation in the United States, which, for now, remains very strong.

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