The US dollar is the world’s most dominant currency and has gained the trust of the global markets. However, the rising geopolitical tensions and conflicts are eroding trust in the USD. Developing countries accuse Western nations of weaponizing their currencies through sanctions and tariffs.
Sanctions, tariffs, and national debt are the growing reasons to distrust the greenback. Despite the unending angst against the greenback, the world still conducts global transactions in the USD. In this article, we will explain why international transactions still take place in the US dollar in the first place.
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Why Transactions Are Still Conducted in the US Dollar?
In simple terms, the US dollar is the world’s reserve currency, and all transactions are initiated under its wing. Now, let’s go much broader and learn why the greenback is much more important than imagined.
Central Bank Reserves: The majority of countries have the US dollar as their primary central reserve currency in their respective central banks. The reason for this is that the USD withstands economic shocks and also bounces back when it dips. Around 58.5% of the world’s central banks’ reserves are composed of the US dollar.
Government Borrowing: Governments and multinational corporations around the world borrow money in the US dollar only. The reason is to ensure their creditors are protected against any foreign exchange risk. Around 64% of the world’s debt is USD-denominated as of 2025. Local currencies cannot withstand the market’s downturn, and lenders rarely agree to this.
International Payments: Close to 58% of the world’s payments are conducted in the US dollar. 54% of the world’s foreign trade invoices are also billed in the USD. The euro, pound, Japanese yen, and Chinese yuan are distant behind. In addition, the US economy is 26% of the world’s GDP, which is the highest.
In conclusion, nobody can escape the clutches of the US dollar, and it’s the world’s reserve currency for a reason. Stepping aside from the greenback to push local currencies is like putting a wedge in your own economy.