Why dollar Price is Increasing in India? Historical Reasons : There are many types of currencies around the world, such as rupee, yuan, euro, pound, however, the dollar is traded worldwide.
The value of the dollar
The depreciation of the Indian rupee against the dollar has been a hot topic in India for months. The Indian rupee has depreciated by about 10% against the dollar since January 2018.
Despite the Indian rupee, most of the world’s currencies have depreciated. So in this article we are trying to find out the root causes behind the global acceptance of the dollar.
History of the dollar
Prior to the Bretton Woods Agreement of 1944, most countries in the world determined the exchange rate of their original currency according to the value of gold. But when the Bretton Woods Agreement of 1944 was signed; The dollar is well recognized and member countries agree to determine the exchange rate of their currencies in dollar terms.
But in the early 1970s, most countries began to demand gold from the USA in exchange for their currency to fight high inflation, which reduced the US gold reserves. So since 1971, the then US President Nixon has broken the dollar vs. gold exchange agreement. Henceforth the exchange rates of different currencies are determined by the demand and supply forces.
Why the constant appreciation of the dollar
Contrary to these estimates, the US dollar has retained its position as the world’s major currency reserve. Countries already had huge stocks of dollars and the currency also has global confidence, so its liquidity remained stable. The main reason why most countries adopt it as their official currency is its stability. It is considered a safe currency. And it is backed by the US Treasury, which gives significant confidence in its ability to pay its obligations. The US economy is another influential factor. Even though its growth rate is not as fast as the major developing economies, it is still the largest and most powerful economy in the world.
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The main reason for the value of the dollar
The Indian rupee continues to weaken against the dollar. Apart from the Indian rupee, other world currencies are also valued in dollars. The dollar is also called the world’s ‘powerful’ currency. There are many types of currencies around the world, such as rupee, yuan, euro, pound, however, the dollar is traded worldwide. The dollar is considered the international currency for every country in the world, there are several reasons behind this.
Most gold in the world is extracted from the US, whenever a country wants to buy gold from the US it only wants to pay it in currency dollars. Other countries have to accept this as well. However, this is only one reason why the dollar is powerful.
Why dollar Price is Increasing in India? Historical Reasons
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Most of the world’s arms manufacturers are American. When a country needs weapons, it depends on America, in exchange for weapons the United States is paid in dollars.
Most of the crude oil companies in the Arab world, including Iraq and Iran, are based in the United States, preferring to pay in dollars. At the same time, the United States is at the forefront of producing oil with shale technology, until a decade ago the United States dominated shale technology, which is why the dollar is the world’s most powerful currency.