As China, India, and Russia dabble in trade using partner currencies for payment instead of the U.S. dollar, various media are rife with speculation about the demise of the dollar as world reserve currency. How much truth is there to this claim? Not much.
The rise of the dollar
The status of the U.S. dollar as a preferred currency for international trade and as a reserve currency has not been a result of any purposeful policy or an international agreement. The rise of the dollar as the world currency closely aligns with the rise of the U.S. as one of the world’s strongest economies with a deep financial system and a stable government. This is not to say there were no competitors. Starting with the Great Britain Pound to the emergence of the euro as the currency of the European Union, the position of the dollar has been challenged from time to time. However, the dollar seems to continue its dominance uninterrupted.
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