American Dollar is Still the King – But For How Long?

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Something happened in November 2008, which had never happened before in history. One upstart euro, which began to be used as the official currency in some 17 European countries in 1995, outperformed the megalithic US dollar. The euro had been adopted by the financial markets in 1999. The US dollar slipped from the top of the pedestal and lost its position as the world's first currency in circulation to the benefit of the euro in November 2008 The importance of this event has not been lost on anyone.

The euro was first valued at 1.18 against one dollar. It started to lose ground quickly. The trend continued until it fell to 0.8 per dollar in October 2000. When the national currencies of the member countries of the European Union were replaced by the # 39, he took a turnaround and began to appreciate himself regularly. It reached parity with the dollar in July 2002. It has since increased in value. His career graph shows that he exceeded his initial value in May 2003 and reached 1.3 against the dollar. It was the time when the dollar went through its difficult phase and lost against all major currencies. After a period of uncertainty, the euro again reached its highest value of $ 1.5 in July 2008, but fell back to $ 1.25, although still higher than its initial value. As of now, that is, November 2009, it stands at a respectable $ 1.48.

The US dollar is truly the international currency tradable everywhere on Earth. Countries like the British Virgin Islands, Bermuda and Ecuador use the dollar as their official currency or with their national currencies. Others, such as Lebanon and Iraq, have notified the dollar as the de facto currency.

To come back to the touchy issue of the euro taking over internationally and replacing the dollar, there is all kinds of speculation circulating. The downward trend took shape in the days of President Nixon, when the administration started spending more money than it received as income. OPEC came to its aid and made up for the deficit. He also bought US Treasury bonds. Japan followed suit and unloaded its important financial baggage in the United States to buy the bonds.

Euro-denominated bonds are in circulation and pose a real threat to US bonds. OPEC seeks to invest in euro bonds. This will further complicate the situation for the dollar and interest rates in the United States are sure to rise. Indeed, demand is increasing enormously and supply may not come from Japan and OPEC.

That this does not discourage the Americans because the world economy will collapse completely without the dollar retaining its position of choice. At least that is the position perceived for the moment. The economies of the world will not like to be left behind and left to hold the bag. But for how long?


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