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International Issues

International Respect for the Dollar

Countries around the world are increasingly opting to keep their international reserves in dollars, according to the International Monetary Fund's recent annual report. This is due to the fact that U.S. monetary policy has focused on price stability since the early 1980s, say financial experts. During the past ten years, the U.S. dollar has remained the dominant international reserve currency -- accounting for 59 percent of the identified foreign exchange reserves in 1996. Since 1990, the only major currency that increased its share of countries' reserves was the dollar -- with every other major currency either falling or holding steady. Last year, total international reserves rose by 11 percent -- with non-gold reserves increasing 15 percent and the market value of the stock of official gold reserves falling 2 percent. Experts conclude that dollar and dollar-denominated securities are displacing gold as the first choice for international holdings. A number of monetary analysts have predicted in recent years that the European euro would threaten the dollar's 50-year dominance as the world's benchmark currency. But as the euro prepares to make its debut, other analysts view that prediction as increasingly shaky. Source: Perspective, "The Almighty Dollar," Investor's Business Daily, September 17, 1997.

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