US Dollar Dominance

Extracted Attributes

• Challenges

  Gradual decline in share of allocated foreign reserves, rise of nontraditional reserve currencies, geopolitical and geostrategic shifts, de-dollarization discussions

• Initial Standard

  Bimetallic (silver or gold)

• Current Global Status

  World's primary reserve currency

• Key Supporting Factors

  Size and strength of US economy, deep and liquid capital markets, rule of law, predictable legal systems, commitment to a free-floating regime, smooth functioning of the financial system for USD liquidity, institutional transparency

• Shift to Gold Standard

  1900

• Elimination of Gold Link

  1971

• Primary Issuance Form Since 1913

  Federal Reserve Notes

• Standard Unit of Money Established

  1792

• Share of Global FX Reserves (Q2 2024)

  Over 50%

Timeline

• The Coinage Act of 1792 established the United States dollar as the country's standard unit of money and created the United States Mint. (Source: Wikipedia)

  1792

• The United States dollar formally adopted the gold standard. (Source: Wikipedia)

  1900

• The Federal Reserve System was founded, and the dollar has since been primarily issued in the form of Federal Reserve Notes. (Source: Wikipedia)

  1913

• The United States dollar became the world's dominant reserve currency, particularly after World War II and the Bretton Woods Agreement. (Source: Wikipedia, Investopedia)

  Undated (Mid-20th Century)

• All links of the United States dollar to gold were eliminated. (Source: Wikipedia)

  1971

• The Genius Act was signed into law at the White House, establishing a regulatory framework for stablecoins and aiming to solidify US Dollar Dominance. (Source: Related Documents)

  Undated (Recent)

• The US dollar continues to be the preeminent reserve currency despite a gradual decline in its share of allocated foreign reserves and ongoing discussions about de-dollarization. (Source: IMF, J.P. Morgan)

  Undated (Ongoing)

History of the United States dollar

The history of the United States dollar began with moves by the Founding Fathers of the United States to establish a national currency based on the Spanish silver dollar, which had been in use in the North American colonies of the Kingdom of Great Britain for over 100 years prior to the United States Declaration of Independence. The new Congress's Coinage Act of 1792 established the United States dollar 1000 as the country's standard unit of money, creating the United States Mint tasked with producing and circulating coinage. Initially defined under a bimetallic standard in terms of a fixed quantity of silver or gold, it formally adopted the gold standard in 1900, and finally eliminated all links to gold in 1971. Since the founding of the Federal Reserve System in 1913 as the central bank of the United States, the dollar has been primarily issued in the form of Federal Reserve Notes. The United States dollar is now the world's primary reserve currency held by governments worldwide for use in international trade.

Web Search Results

• Dollar Dominance in the International Reserve System: An Update

  Dollar dominance—the outsized role of the US dollar in the world economy—has been brought into focus recently as the robustness of the US economy, tighter monetary policy and heightened geopolitical risk have contributed to a higher greenback valuation. At the same time, economic fragmentation and the potential reorganization of global economic and financial activity into separate, nonoverlapping blocs could encourage some countries to use and hold other international and reserve currencies. [...] Dollar Dominance in the International Reserve System: An Update Image 7: Image 8: =========================================================================================================================================================================================================== The US dollar continues to cede ground to nontraditional currencies in global foreign exchange reserves, but it remains the preeminent reserve currency [...] Recent data from the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) point to an ongoing gradual decline in the dollar’s share of allocated foreign reserves of central banks and governments. Strikingly, the reduced role of the US dollar over the last two decades has not been matched by increases in the shares of the other “big four” currencies—the euro, yen, and pound. Rather, it has been accompanied by a rise in the share of what we have called nontraditional reserve

• De-dollarization: The end of dollar dominance? - J.P. Morgan

  “Diversification away from the dollar is a growing trend, but we find that the factors that support dollar dominance remain well-entrenched and structural in nature. The dollar’s role in global finance and its economic and financial stability implications are supported by deep and liquid capital markets, rule of law and predictable legal systems, commitment to a free-floating regime, and smooth functioning of the financial system for USD liquidity and institutional transparency,” Chang said. [...] All in all, while global trade and FX reserves have flatlined, the dollar still retains its influence in this space, especially when taking into account other factors including dollar-denominated bank deposits, FX volumes and trade invoicing. “Overall, the dollar’s transactional dominance remains undisputed,” Chang said. The dollar’s share of FX reserves has fallen Line chart showing shares of allocated FX reserves by currency. [...] The U.S. dollar is the world’s primary reserve currency, and it is also the most widely used currency for trade and other international transactions. However, its hegemony has come into question in recent times due to geopolitical and geostrategic shifts.

• Reserve currency - Wikipedia

  29. ^Partington, Richard (11 April 2025). "The damage is done: Trump's tariffs put the dollar's safe haven status in jeopardy". _The Guardian_. ISSN "ISSN (identifier)")0261-3077. Retrieved 14 April 2025. 30. ^Wee, Rae (11 April 2025). "Mighty U.S. dollar feels heat as Trump's tariffs spark trade turmoil". _Reuters_. Retrieved 14 April 2025. 31. ^Stepek, John (11 April 2025). "Are the US Dollar's Days of Dominance Numbered?". _Bloomberg_. Retrieved 14 April 2025. [...] The United Kingdom's pound sterling was the primary reserve currency of much of the world in the 19th century and the first half of the 20th century.( However, by the middle of the 20th century, the United States dollar had become the world's dominant reserve currency.( Image 4 Worldwide use of the US dollar: United States External adopters of the US dollar Currencies pegged to the US dollar Currencies pegged to the US dollar w/ narrow band Worldwide use of the euro: Eurozone [...] century, multiple currencies did share the status as primary reserve currencies. Although the British Sterling was the largest currency, both the French franc and the German mark shared large portions of the market until the First World War, after which the mark was replaced by the dollar. Since the Second World War, the dollar has dominated official reserves, but this is likely a reflection of the unusual domination of the American economy during this period, as well as official discouragement

• How the U.S. Dollar Became the World's Reserve Currency

  Federal Reserve Bank of St. Louis. "The Changing Relationship Between Trade and America’s Gold Reserves." Federal Reserve History. "Creation of the Bretton Woods System." Council on Foreign Relations. "The National Debt Dilemma." IMF. "Currency Composition of Official Foreign Exchange Reserves." IMF. "Dollar Dominance and the Rise of Nontraditional Reserve Currencies." ## Related Articles [...] The reserve status is based on the size and strength of the U.S. economy and the dominance of the U.S. financial markets. U.S. currency and U.S. Treasury securities are a common way to store money. In the second quarter of 2024, global central banks held over half of their reserves in U.S. dollars. U.S. Currency Education Program. "The History of U.S. Currency." National Bureau of Economic Research. "The Economics of World War I." [...] The U.S. dollar was officially crowned the world’s reserve currency and backed by the world’s largest gold reserves thanks to the Bretton Woods Agreement. Instead of gold reserves, other countries accumulated reserves of U.S. dollars. Needing a place to store their dollars, countries began buying U.S. Treasury securities, which they considered to be a safe store of money.

• [PDF] An Historical Perspective on the Reserve Currency Status of the U.S. ...

  percent.2 The dollar’s role as the primary reserve currency (and, more generally, as the primary international currency) was not established by decree but, rather, because of the emergence of the U.S. as the world’s major economy. Economists point to several key factors that determine the use of a currency for reserves. These are: • the size of the domestic economy, • the importance of the economy in international trade, • the size, depth, and openness of financial markets, • the convertibility [...] dollar’s share, but it has never fallen below 50 percent. The rise of Germany and Japan as major economic powers led to the view that the deutschemark and the yen would rival the dollar, dividing the world into three currency blocs. The yen’s share of global foreign currency reserves did rise in the 1980s, but peaked at close to 9 percent in 1991 and since has declined to less than 3 percent. The deutschemark was the main reserve currency among the euro legacy currencies and accounted for the [...] macroeconomic policies and deep, liquid, and open financial markets, the dollar will continue to be the major reserve currency. 0 10 20 30 40 50 60 70 80 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Note: Prior to 1999 data for euro is the sum of reserves held in the legacy currencies and ecus.