Forex Currency - The U.S. Dollar – USD

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The United States dollar is hands down the most traded currency in the world and can be paired with all other major currencies. It usually acts as a go-between in triangular arbitrage, since it is the unofficial global reserve currency. This means that the U.S. dollar is held by almost every institutional investment entity and bank on the planet.

 

The global acceptance of the U.S. dollar is one of the main reasons why some countries use it as their official currency, as a substitute of their local currency. This practice is known as dollarization, and the U.S. dollar is widely accepted all over the world, as an informal alternative method of payment.

 

The dollar is a major factor in the forex market for other currencies, since it acts as the target rate or benchmark for countries that choose to peg or fix their currencies to the value of the dollar. China has pegged its currency to the dollar, even though most central bankers and economists disagree. A lot of countries fix their exchange rates to the U.S. dollar to stabilize their exchange rate, instead of allowing the forex market to fluctuate its relative value.

 

The defining feature of the U.S. dollar is that it is used as the standard currency for a lot of commodities, like precious metals and crude oil. This means that the value of these commodities will fluctuate due to the relative value of the dollar, as well as due to supply and demand.

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Did you know?

Did you know the coins and currency-pairs have nicknames? The US Dollar is nicknamed a Greenback or Buck. The EUR/USD pair is called Fiber, the GBP/USD pair is called Cable, the USD/JPY is Ninja and the USD/RUB is Barney!

See the latest analysis of the USD pairs

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