International use of the American dollar

Besides being the main currency of the United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

United States dollar

The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

is used as the standard unit of currency in international markets for commodities such as gold and petroleum

Petroleum

Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...

(the latter sometimes called petrocurrency

Petrocurrency

Petrocurrency is a portmanteau neologism used with three distinct meanings, though often confused:#Trading surpluses of oil producing nations, originally called petrodollars...

is the source of the term petrodollar

Petrodollar

A petrodollar is a United States dollar earned by a country through the sale of petroleum. The term was coined by Ibrahim Oweiss, a professor of economics at Georgetown University, in 1973...

). Some non-U.S. companies dealing in globalized markets, such as Airbus

Airbus

Airbus SAS is an aircraft manufacturing subsidiary of EADS, a European aerospace company. Based in Blagnac, France, surburb of Toulouse, and with significant activity across Europe, the company produces around half of the world's jet airliners....

, list their prices in dollars.

The U.S. dollar is the world's foremost reserve currency

Reserve currency

A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...

. In addition to holdings by central banks and other institutions, there are many private holdings, which are believed to be mostly in one-hundred-dollar banknotes (indeed, most American banknotes actually are held outside the United States). All holdings of U.S.-dollar bank deposits held by non-residents of the United States are known as "eurodollar

Eurodollar

Eurodollars are time deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve. Consequently, such deposits are subject to much less regulation than similar deposits within the U.S., allowing for higher margins. The term...

s" (not to be confused with the euro

Euro

The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

), regardless of the location of the bank holding the deposit (which may be inside or outside the U.S.).

Economist Paul Samuelson

Paul Samuelson

Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in...

and others (including, at his death, Milton Friedman

Milton Friedman

Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...

) have maintained that the overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate or the flow of trade to readjust. But Samuelson stated in 2005 that at some uncertain future period these pressures would precipitate a run against the U.S. dollar with serious global financial consequences.

International reserve currency

The U.S. dollar is an important international reserve currency along with the euro. The euro inherited this status from the German mark

German mark

The Deutsche Mark |mark]], abbreviated "DM") was the official currency of West Germany and Germany until the adoption of the euro in 2002. It is commonly called the "Deutschmark" in English but not in German. Germans often say "Mark" or "D-Mark"...

, and since its introduction, has increased its standing considerably, mostly at the expense of the dollar. Despite the dollar's recent losses to the euro, it is still by far the major international reserve currency, with an accumulation more than double that of the euro.

In August, 2007, two scholars affiliated with the government of the People's Republic of China threatened to sell its substantial reserves in American dollars in response to American legislative discussion of trade sanctions designed to revalue the Chinese yuan

Chinese yuan

The yuan is the base unit of a number of modern Chinese currencies. The yuan is the primary unit of account of the Renminbi.A yuán is also known colloquially as a kuài . One yuán is divided into 10 jiǎo or colloquially máo...

. The Chinese government denied that selling dollar-denominated assets would be an official policy in the foreseeable future.

Former Federal Reserve Chairman Alan Greenspan

Alan Greenspan

Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...

said in September 2007 that the euro could replace the U.S. dollar as the world's primary reserve currency. It is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency."

U.S. Dollar Index

The U.S. Dollar Index (Ticker: DXY) is the creation of the New York Board of Trade

New York Board of Trade

The New York Board of Trade , renamed ICE Futures US in September of 2007, is a wholly owned subsidiary of IntercontinentalExchange . It is a physical commodity futures exchange located in New York City. It originated in 1870 as the New York Cotton Exchange...

(NYBOT). It was established in 1973 for tracking the value of the USD against a basket of currencies

Currency basket

A currency basket is a portfolio of selected currencies with different weightings. A currency basket is commonly used to minimize the risk of currency fluctuations. An example of a currency basket is the European Currency Unit that was used by the European Community member states as the unit of...

, which, at that time, represented the largest trading partners of the United States. It began with 17 currencies from 17 nations, but the launch of the euro subsumed 12 of these into one, so the USDX tracks only six currencies today.

Euro Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...	57.6%
Japanese yen Japanese yen The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...	13.6%
Pound sterling Pound sterling The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...	11.9%
Canadian dollar Canadian dollar The Canadian dollar is the currency of Canada. As of 2007, the Canadian dollar is the 7th most traded currency in the world. It is abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies...	9.1%
Swedish krona Swedish krona The krona has been the currency of Sweden since 1873. Both the ISO code "SEK" and currency sign "kr" are in common use; the former precedes or follows the value, the latter usually follows it, but especially in the past, it sometimes preceded the value...	4.2%
Swiss franc Swiss franc The franc is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia. Although not formally legal tender in the German exclave Büsingen , it is in wide daily use there...	3.6%
Source: NYBOT, " US Dollar Index", pg.3 (PDF)

The Index is described by the NYBOT as "a trade weighted geometric average". The baseline of 100.00 on the USDX was set at its launch in March 1973. This event marks the watershed between the wider margins arrangement of the Smithsonian

Smithsonian Agreement

The Smithsonian Agreement was a December 1971 agreement that ended the fixed exchange rates established at the Bretton Woods Conference of 1944.-History:...

regime and the period of generalized floating that led up to the Second Amendment of the Articles of Agreement of the International Monetary Fund

International Monetary Fund

The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

. Since 1973, the USDX has climbed as high as the 160s and drifted as low as the 70s.

The USDX has not been updated to reflect new trading realities in the global economy, where the bulk of trade has shifted strongly towards new partners like China and Mexico and oil-exporting countries while the United States has de-industrialized.

Dollarization and fixed exchange rates

Other nations besides the United States use the U.S. dollar as their official currency, a process known as official dollarization

Dollarization

Dollarization occurs when the inhabitants of a country use foreign currency in parallel to or instead of the domestic currency. The term is not only applied to usage of the United States dollar, but generally to the use of any foreign currency as the national currency.The biggest economies to have...

. For instance, Panama

Panama

Panama , officially the Republic of Panama , is the southernmost country of Central America. Situated on the isthmus connecting North and South America, it is bordered by Costa Rica to the northwest, Colombia to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south. The...

has been using the dollar alongside the Panamanian balboa

Panamanian balboa

The balboa is, along with the United States dollar, one of the official currencies of Panama. It is named in honor of the Spanish explorer/conquistador Vasco Núñez de Balboa. The balboa is subdivided into 100 centésimos.-The History of the Panamanian Balboa:The balboa replaced the Colombian peso...

as the legal tender since 1904 at a conversion rate of 1:1. Ecuador

Economy of Ecuador

The economy of Ecuador is based mostly on exports of bananas, oil, shrimp, gold, other primary agricultural products and money transfers from nearly a million Ecuadorian emigrants employed abroad. In 2002, oil accounted for about one-third of public sector revenue and 40% of export earnings...

(2000), El Salvador

Economy of El Salvador

-Opening:The GDP variable has been growing at a snail's pace since the signing of peace accords in 1992, in an environment of macroeconomic instability. A problem that the Salvadoran economy faces is the inequality in the distribution of income...

(2001), and East Timor

Economy of East Timor

The economy of East Timor is ranked as a lower-middle income economy by the World Bank. It is placed 158th by Human Development Index, indicating a low level of human development. 20% of the population is unemployed, and 52.9% lives on less than US $1.25 a day...

(2000) all adopted the currency independently. The former members of the U.S.-administered Trust Territory of the Pacific Islands

Trust Territory of the Pacific Islands

The Trust Territory of the Pacific Islands was a United Nations trust territory in Micronesia administered by the United States from 1947 to 1986.-History:...

, which included Palau

Palau

Palau , officially the Republic of Palau , is an island nation in the Pacific Ocean, east of the Philippines and south of Tokyo. In 1978, after three decades as being part of the United Nations trusteeship, Palau chose independence instead of becoming part of the Federated States of Micronesia, a...

, the Federated States of Micronesia

Federated States of Micronesia

The Federated States of Micronesia or FSM is an independent, sovereign island nation, made up of four states from west to east: Yap, Chuuk, Pohnpei and Kosrae. It comprises approximately 607 islands with c...

, and the Marshall Islands

Marshall Islands

The Republic of the Marshall Islands , , is a Micronesian nation of atolls and islands in the middle of the Pacific Ocean, just west of the International Date Line and just north of the Equator. As of July 2011 the population was 67,182...

, chose not to issue their own currency after becoming independent, having all used the U.S. dollar since 1944. Two British dependencies also use the U.S. dollar: the British Virgin Islands

British Virgin Islands

The Virgin Islands, often called the British Virgin Islands , is a British overseas territory and overseas territory of the European Union, located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin Islands archipelago, the remaining islands constituting the U.S...

(1959) and Turks and Caicos Islands

Turks and Caicos Islands

The Turks and Caicos Islands are a British Overseas Territory and overseas territory of the European Union consisting of two groups of tropical islands in the Caribbean, the larger Caicos Islands and the smaller Turks Islands, known for tourism and as an offshore financial centre.The Turks and...

(1973). The islands Bonaire, Sint Eustatius and Saba have adopted the dollar on January 1, 2011 as a result of the dissolution of the Netherlands Antilles.

Some countries that have adopted the U.S. dollar issue their own coins: See Ecuadorian centavo coins

Ecuadorian centavo coins

Ecuadorian centavo coins were introduced in 2000 when Ecuador converted its currency from the sucre to the U.S. dollar. The coins are in denominations of 1, 5, 10, 25 and 50 centavos and are identical in size and value to their U.S. cent counterparts They circulate within Ecuador alongside coins...

, Panamanian Balboa

Panamanian balboa

and East Timor centavo coins

East Timor centavo coins

For earlier currencies issued by East Timor, see Portuguese Timorese escudo and Portuguese Timorese pataca.East Timor centavo coins were introduced in East Timor in 2003 for use alongside United States Dollar banknotes and coins, which had been introduced in 2000 to replace the Indonesian rupiah...

.

Some other countries link their currency to U.S. dollar at a fixed exchange rate

Fixed exchange rate

A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...

. The local currencies of Bermuda

Economy of Bermuda

Bermuda enjoys one of the highest per capita incomes in the world, having successfully exploited its location by providing financial services for international firms and luxury tourist facilities for 360,000 visitors annually. The tourist industry, which accounts for an estimated 28% of GDP,...

and the Bahamas

Economy of the Bahamas

The Bahamas is a stable, developing nation with an economy heavily dependent on tourism and offshore banking. Steady growth in tourism receipts and a boom in construction of new hotels, resorts, and residences had led to solid GDP growth in recent years, but the slowdown in the US economy and the...

can be freely exchanged at a 1:1 ratio for USD. Argentina

Argentina

Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...

used a fixed 1:1 exchange rate

Exchange rate

In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...

between the Argentine peso

Argentine peso

The peso is the currency of Argentina, identified by the symbol $ preceding the amount in the same way as many countries using dollar currencies. It is subdivided into 100 centavos. Its ISO 4217 code is ARS...

and the U.S. dollar from 1991 until 2002. The currencies of Barbados

Economy of Barbados

Since achieving independence in 1966, the island nation of Barbados has transformed itself from a low-income economy dependent upon sugar production, into an upper-middle-income economy based on tourism and the offshore sector. Barbados went into a deep recession in the 1990s after 3 years of...

and Belize

Economy of Belize

The economy of Belize depended on forestry until well into the 20th century. Logwood, used to make dye, was Belize's initial main export. However, the supply outstripped the demand, especially as Europeans developed man-made dyes which were less expensive. Loggers turned to mahogany, which grew...

are similarly convertible at an approximate 2:1 ratio. The Netherlands Antillean guilder (and its successor the Caribbean guilder

Caribbean guilder

The Caribbean guilder is the proposed currency of the Caribbean islands of Curaçao and Sint Maarten which formed after the dissolution of the Netherlands Antilles in October 2010. The Netherlands Antillean guilder is expected continue to circulate until 2013 as the currency was not finalised in...

) as well as the Aruban florin

Aruban florin

The florin is the currency of Aruba. It is subdivided into 100 cents. The florin was introduced in 1986, replacing the Netherlands Antillean guilder at par.-History:...

are pegged to the Dollar at a fixed rate of 1:1.79. In Lebanon

Economy of Lebanon

The economy of Lebanon is a developing economy, with a private sector that contributes to 75% of aggregate demand and a large banking sector that supports this demand. In 2009, Lebanon ranked 33rd in the Human Poverty Index...

, one dollar is equal to 1500 Lebanese pound

Lebanese pound

The Lebanese pound is the currency unit of Lebanon. It is divided into 100 piastres but inflation has eliminated the subdivisions....

, and is used interchangeably with local currency as de facto legal tender. The exchange rate between the Hong Kong dollar

Hong Kong dollar

The Hong Kong dollar is the currency of the jurisdiction. It is the eighth most traded currency in the world. In English, it is normally abbreviated with the dollar sign $, or alternatively HK$ to distinguish it from other dollar-denominated currencies...

and the United States dollar has also been linked

Linked exchange rate

A linked exchange rate system is a type of exchange rate regime to link the exchange rate of a currency to another. It is the exchange rate system implemented in Hong Kong to stabilise the exchange rate between the Hong Kong dollar and the United States dollar...

since 1983 at HK$7.8/USD, and pataca

Macanese pataca

The pataca is the currency of Macau. It is subdivided into 100 avos , with 10 avos called ho in Cantonese. The abbreviation MOP$ is commonly used....

of Macau

Macau

Macau , also spelled Macao , is, along with Hong Kong, one of the two special administrative regions of the People's Republic of China...

, pegged to Hong Kong dollar at MOP1.03/HKD, indirectly linked to the U.S. dollar at roughly MOP8/USD. Several oil-producing Arab

Arab

Arab people, also known as Arabs , are a panethnicity primarily living in the Arab world, which is located in Western Asia and North Africa. They are identified as such on one or more of genealogical, linguistic, or cultural grounds, with tribal affiliations, and intra-tribal relationships playing...

countries on the Persian Gulf, including Saudi Arabia

Saudi Arabia

The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...

, peg their currencies to the dollar, since the dollar is the currency used in the international oil trade.

The People's Republic of China

People's Republic of China

China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...

's renminbi

Renminbi

The Renminbi is the official currency of the People's Republic of China . Renminbi is legal tender in mainland China, but not in Hong Kong or Macau. It is issued by the People's Bank of China, the monetary authority of the PRC...

was informally and controversially pegged to the dollar in the mid-1990s at ¥ 8.28/USD. Likewise, Malaysia pegged its ringgit

Malaysian ringgit

The Malaysian ringgit is the currency of Malaysia. It is divided into 100 sen...

at RM3.8/USD in 1997. On July 21, 2005 both countries removed their pegs and adopted managed floats against a basket of currencies. Kuwait

Kuwait

The State of Kuwait is a sovereign Arab state situated in the north-east of the Arabian Peninsula in Western Asia. It is bordered by Saudi Arabia to the south at Khafji, and Iraq to the north at Basra. It lies on the north-western shore of the Persian Gulf. The name Kuwait is derived from the...

did likewise on May 20, 2007, and Syria

Syria

Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....

did likewise in July 2007. However, after three years of slow appreciation, the Chinese yuan has been de facto re-pegged to the dollar since July 2008 at a value of ¥6.83/USD; although no official announcement had been made, the yuan has remained around that value within a narrow band since then, similar to the Hong Kong dollar.

Belarus

Belarus

Belarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...

, on the other hand, pegged its currency, the Belarusian ruble

Belarusian ruble

The ruble is the currency of Belarus. The symbol for the ruble is Br and the ISO 4217 code is BYR.-First ruble, 1992–2000:The breakup of supply chain in the former Soviet enterprises demanded that goods be bought and sold on the market, often requiring cash settlement...

, to a basket of foreign currencies (U.S. dollar, euro and Russia

Russia

Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

n ruble) in 2009.

In some countries, such as Peru

Peru

Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....

and Uruguay

Uruguay

Uruguay ,officially the Oriental Republic of Uruguay,sometimes the Eastern Republic of Uruguay; ) is a country in the southeastern part of South America. It is home to some 3.5 million people, of whom 1.8 million live in the capital Montevideo and its metropolitan area...

, the U.S. dollar is commonly accepted, although not officially regarded as, a legal tender. In Mexico's border area and major tourist zones, it is accepted as if it were a second legal currency. Many Canadian merchants close to the border also accept U.S. dollars, though at a value that usually favours the merchant. In Cambodia

Cambodia

Cambodia , officially known as the Kingdom of Cambodia, is a country located in the southern portion of the Indochina Peninsula in Southeast Asia...

, U.S. notes circulate freely and are preferred over the Cambodian riel

Cambodian riel

For earlier Cambodian currencies, see Cambodian tical and Cambodian franc.The riel is the currency of Cambodia. There have been two distinct riel, the first issued between 1953 and May 1975. Between 1975 and 1980, the country had no monetary system. A second currency, also named "riel", has been...

for large purchases, with the riel used for change to break 1 USD. After the U.S. invasion of Afghanistan, U.S. dollars are accepted as if it were legal tender. Prices of most big ticket items such as houses and cars are set in U.S. dollars.

Dollar versus euro

Euro per U.S. dollar 1999–2010
Year	Highest ↑		Lowest ↓
Year	Date	Rate	Date	Rate
1999	03 Dec	€0.9985	05 Jan	€0.8482
2000	26 Oct	€1.2118	06 Jan	€0.9626
2001	06 Jul	€1.1927	05 Jan	€1.0477
2002	28 Jan	€1.1658	31 Dec	€0.9536
2003	08 Jan	€0.9637	31 Dec	€0.7918
2004	14 May	€0.8473	28 Dec	€0.7335
2005	15 Nov	€0.8571	03 Jan	€0.7404
2006	02 Jan	€0.8456	05 Dec	€0.7501
2007	12 Jan	€0.7756	27 Nov	€0.6723
2008	27 Oct	€0.8026	15 Jul	€0.6254
2009	04 Mar	€0.7965	03 Dec	€0.6614
2010	08 Jun	€0.8374	13 Jan	€0.6867
2011*	10 Jan	€0.7750	21 Apr	€0.6857
*Through 21 April 2011
Source: Euro exchange rates in USD, ECB European Central Bank The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...

Not long after the introduction of the euro

Euro

(€ ; ISO 4217

ISO 4217

ISO 4217 is a standard published by the International Standards Organization, which delineates currency designators, country codes , and references to minor units in three tables:* Table A.1 – Current currency & funds code list...

code EUR) as a cash currency in 2002, and the Iraq War costs

Financial cost of the Iraq War

The following is a partial accounting of financial costs of the 2003 Iraq War by the United States and the United Kingdom, the two largest non Iraqi participants of the multinational force in Iraq.-Direct costs:...

from 2003, the dollar began to depreciate steadily in value, as it did against other major currencies. From 2003 to 2005, this depreciation continued, reflecting a widening current account deficit. Although the current account deficit began to stabilize in 2006 and 2007, depreciation persisted. The fallout from the subprime mortgage crisis

Subprime mortgage crisis

The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....

in 2008 prompted the Federal Reserve to lower interest rates in September 2007, and again in March 2008, sending the euro to a record high of $1.6038, reached in July 2008.

In addition to the trade deficit, the U.S. dollar's decline was linked to a variety of other factors, including a major spike in oil prices. Economists such as Alan Greenspan

Alan Greenspan

suggested that another reason for the decline of the dollar was its decreasing role as a major reserve currency. Chinese officials signaled plans to diversify the nation's $1.9 trillion reserve in response to a falling U.S. currency which also set the dollar under pressure.

However, a sharp turnaround began in late 2008 with the onset of the global financial crisis

Late 2000s recession

The late-2000s recession, sometimes referred to as the Great Recession or Lesser Depression or Long Recession, is a severe ongoing global economic problem that began in December 2007 and took a particularly sharp downward turn in September 2008. The Great Recession has affected the entire world...

. As investors sought out safe-haven investments in U.S. treasuries and Japanese government bonds from the financial turmoil, the Japanese yen

Japanese yen

The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...

and United States dollar sharply rose against other currencies, including the euro. At the same time, however, many countries such as China

China

Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

, India

India

India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

and Russia

Russia

Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

announced their intentions to diversify their foreign reserve portfolios away from the U.S. dollar.

The European sovereign debt crisis

2010 European sovereign debt crisis

From late 2009, fears of a sovereign debt crisis developed among investors concerning some European states, intensifying in early 2010 and thereafter.....

that unfolded in 2010 sent the euro falling to a four-year low of $1.1877 on June 7, as investors considered the risk that certain Eurozone

Eurozone

The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...

members may default

Default (finance)

In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...

on their government debt. The euro's decline in 2008-2010 had erased half of its 2000-2008 rally.

International reserve currency

U.S. Dollar Index

Dollarization and fixed exchange rates

Dollar versus euro

See also