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Though there is no single international currency per se, the greenback has certainly dominated that field for quite a while.
The acceptability of any currency depends on the risk:return ratio of investing in that currency. If the value fluctuates too frequently, the currency comes to be seen as volatile. This volatility is a direct function of things like the robustness of their economy, level of government interference in the value of the currency, the country's sovereign credit rating, people's perceptions about the currency, etc.
Historically, the US dollar has had very low inflation (till around the time of the world wars). The country has also been an economic and miliary superpower for close to a century. You may look up what happened to the Reichmark after Germany lost the war, to contrast. People, the world over, have had a faith in the stability of the currency for quite a while. Same is true for the British Pound thanks to its colonial history. Other currencies haven't been able to challenge that dominance.
Of late, currencies like the Euro (and Chinese Yuan) have begun to make their presence felt. So has the Japanese Yen, owing to its post-war economic resurgence.
I have my own take on this, It is different in some sense.
The transition of power happened across great powers during the past - the power was measured in trade, gold etc.
Now, if you analysed the transfer of power over ages - Greeks ->Romans-> Swedes->Turks->Austrians-> Spanish->British-> German->US (I just ordered it with timeline, these might not be the effective transfers of power)
Well Swedes lost power in 10th Century to Britain - that is when the Tudors brought order as we have the great empire set in. Spaniards lost to British, Spanish Armada in 1688 under Queen Isabella II lost to British Royal Navy.
All the power transitions happened with the effective Transfer of Gold. Each great power gave away gold once it fell and the new victor had more gold.
What happened, Post WWII - America had the highest amount of Reserve gold, by virtue of it, It had the right to be the next great power. And its Lend and Lease schemes during the war, Marshall Plan etc. increased its dominance further.
Now, the big question, Can $ be displaced by any other new great power
Post 1973, since the abolition of Gold standard, there is no provision for the nation to pay the bearer in gold, so all the forex reserves in $ cannot be out-rightly converted to Gold like what happened in the past when Gold standard existed.
Now, US is the biggest consumer - Germany, China, Japan are its biggest exporters - all these countries would benefit from a weaker currency and a huge trade surplus. And if you see, Japan for past 30 years has been using inflationary policies and printing more and more money, China has artificially pegged at very low rates its Yuan.
Another concern is, given no Gold standard, what will happen to the $ reserves when it is replaced with some other currency. It is too tough for countries to dump their $ reserves :P
So, In totality the $ Dominance is a well played script of US and also the result of post war neo-liberal macroeconomic policies of various countries.
as @ArindamSarkar said, US $, Swiss Franc are considered safe havens due to lower inflation and risks.
If I may add some more to @Thor points.. The present hybrid system has its limitations. Even though US $ is no longer under the same Bretton woods agreement, $ is still a de facto currency in majority of world trade because of less volatility as it was pointed out.. Now if I can recall somewhere in 2009 or 2010 the Chinese proposed to use SDRs as a formal global currency at an IMF conference.. This was to reduce dependence on USD... SDRs although are not a currency in present form but actully a credit, this proposal is a mature one and may possibly see the light in the future.
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Comments
currency per se, the greenback has certainly dominated that field for quite a while.
The acceptability of any currency depends on the risk:return ratio of investing in that currency. If the value fluctuates too frequently, the currency comes to be seen as volatile. This volatility is a direct function of things like the robustness of their economy, level of government interference in the value of the currency, the country's sovereign credit rating, people's perceptions about the currency, etc.
Historically, the US dollar has had very low inflation (till around the time of the world wars). The country has also been an economic and miliary superpower for close to a century. You may look up what happened to the Reichmark after Germany lost the war, to contrast. People, the world over, have had a faith in the stability of the currency for quite a while. Same is true for the British Pound thanks to its colonial history. Other currencies haven't been able to challenge that dominance.
Of late, currencies like the Euro (and Chinese Yuan) have begun to make their presence felt. So has the Japanese Yen, owing to its post-war economic resurgence.
The transition of power happened across great powers during the past - the power was measured in trade, gold etc.
Now, if you analysed the transfer of power over ages - Greeks ->Romans-> Swedes->Turks->Austrians-> Spanish->British-> German->US (I just ordered it with timeline, these might not be the effective transfers of power)
Well Swedes lost power in 10th Century to Britain - that is when the Tudors brought order as we have the great empire set in. Spaniards lost to British, Spanish Armada in 1688 under Queen Isabella II lost to British Royal Navy.
All the power transitions happened with the effective Transfer of Gold. Each great power gave away gold once it fell and the new victor had more gold.
What happened, Post WWII - America had the highest amount of Reserve gold, by virtue of it, It had the right to be the next great power. And its Lend and Lease schemes during the war, Marshall Plan etc. increased its dominance further.
Now, the big question, Can $ be displaced by any other new great power
Post 1973, since the abolition of Gold standard, there is no provision for the nation to pay the bearer in gold, so all the forex reserves in $ cannot be out-rightly converted to Gold like what happened in the past when Gold standard existed.
Now, US is the biggest consumer - Germany, China, Japan are its biggest exporters - all these countries would benefit from a weaker currency and a huge trade surplus. And if you see, Japan for past 30 years has been using inflationary policies and printing more and more money, China has artificially pegged at very low rates its Yuan.
Another concern is, given no Gold standard, what will happen to the $ reserves when it is replaced with some other currency. It is too tough for countries to dump their $ reserves :P
So, In totality the $ Dominance is a well played script of US and also the result of post war neo-liberal macroeconomic policies of various countries.
as @ArindamSarkar said, US $, Swiss Franc are considered safe havens due to lower inflation and risks.
The present hybrid system has its limitations. Even though US $ is no longer under the same Bretton woods agreement, $ is still a de facto currency in majority of world trade because of less volatility as it was pointed out..
Now if I can recall somewhere in 2009 or 2010 the Chinese proposed to use SDRs as a formal global currency at an IMF conference.. This was to reduce dependence on USD...
SDRs although are not a currency in present form but actully a credit, this proposal is a mature one and may possibly see the light in the future.