U.S. Dollar: The World's Benchmark Currency (Essay Sample)

U.S. Dollar, the World's Benchmark Currency
Name
Institution
Course Name
Prof. Name
Date
U.S. Dollar, the World's Benchmark Currency
A benchmark currency is one that is accepted for trade globally. Examples of such internationally accepted mediums of transactions include the U.S dollar, the Euro, and the Yen. Countries measure the performance of their monetary systems based on these denominations. Characteristically, the Bretton Woods Agreement, the position of the U.S. as a strong lender, and an attractive open market economy constitute prominent factors that have made the U.S. dollar the world's benchmark currency.
The U.S. dollar became the world's benchmark currency following an endorsement known as the Bretton Woods Agreement. One year to the end of the Second World War, allied nations convened in Bretton Wood, New Hampshire, whereby they nullified world currencies' pegging to gold (Ocampo, 2017). Instead, central banks from distinct countries would get fixed exchange rates between their national currencies and the U.S. federal bank's dollar. Since then, more than half of all foreign bank reserves are today based on the American dollar in the form of cash or U.S bonds (Chavez-Dreyfuss, 2020). Following the Bretton Woods Agreement, the U.S. dollar is rightfully the world's benchmark currency.
Another reason for regarding the U.S. dollar as a global currency stems from America's relative strength as a leading finance assistance nation in the