Could America lose the global currency race?

14 Min Read


Concept illustration of U.S. stocks showing stock market graphic, U.S. flag and the U.S. dollar. - FOTOGRIN // Shutterstock
Concept illustration of U.S. stocks showing stock market graphic, U.S. flag and the U.S. dollar. – FOTOGRIN // Shutterstock

Understand the historical dominance of the U.S. dollar, the emerging threats from geopolitical shifts and digital currencies, and the profound implications if America’s global monetary influence wanes.

The U.S. dollar has long been the undisputed heavyweight champion of global finance, serving as the world’s primary reserve currency and the bedrock for international trade and investment. Its enduring dominance is deeply rooted in a rich history, the sheer size and stability of the American economy, and the robust infrastructure of its financial markets. Yet, as the 21st century unfolds, this formidable position faces unprecedented challenges from geopolitical shifts, the rise of economic rivals, and transformative technological advancements, such as digital currencies. OANDA explores the foundations of the dollar’s power, the forces testing its supremacy, and the potential implications should its global monetary influence wane.

Data chart showing gold price appreciation against USD from 1960-2025. - OANDA
Data chart showing gold price appreciation against USD from 1960-2025. – OANDA


The U.S. dollar’s history is deeply connected to the economic and political development of the United States. Initially, various currencies circulated within the colonies. The Coinage Act of 1792 officially established the dollar as the standard unit of currency in the United States. The Federal Reserve, created in 1913, further solidified the dollar’s role in the nation’s monetary system. A key turning point was the Bretton Woods Agreement in 1944, which made the dollar the world’s primary reserve currency. Under this system, other currencies were pegged to the dollar, which was in turn linked to gold. When the Bretton Woods system collapsed in 1971, the era of floating exchange rates began, in which the dollar’s value was determined by market forces. Despite facing challenges and fluctuations over time, the dollar has maintained its dominant position in global finance as a key reserve and transaction currency.

Data chart on world official foreign currency reserves and how it decreased in the fourth quarter of 2024. - OANDA
Data chart on world official foreign currency reserves and how it decreased in the fourth quarter of 2024. – OANDA


A reserve currency is one held in significant quantities by central banks and financial institutions as part of their foreign exchange reserves. It is used for international transactions and investments, as well as a benchmark for global trade. The most desirable reserve currencies are those perceived as stable, liquid, and backed by large, trusted economies.

The U.S. dollar fits these criteria almost perfectly. As of 2024, the U.S. dollar accounts for approximately 57.8% of global foreign exchange reserves, according to the International Monetary Fund (IMF). The euro is second at 19.8%, followed by the Japanese yen at 5.82%, the British pound at 4.73%, and, increasingly, the Chinese yuan at 2.18%.



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