Currency Dollar

The US dollar is undoubtedly the prime mover of the world's financial systems. Most countries rein in the value of their currencies through their dollar reserves; foreign central banks hold US Treasury bonds; and a majority of the oil cartel's holdings are still in dollars.

In forex markets, the dollar is the most traded currency, figuring in more than 80 percent of all transactions. The euro trails behind and is continually expanding in terms of international reach but forex trading is still primarily centered on the dollar.

Central banks, fearing that the American currency was facing an imminent devaluation, started clamoring for gold in exchange for the dollars they were holding. From a legal tender with a measurable equivalent in gold, the dollar became what some economists call a political currency. Since most financial transactions and commodities, particularly oil, were traded in dollars, the US currency enjoyed a strong demand despite the country's burgeoning trade deficit.