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Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose.

Is US dollar the strongest currency in the world?

Explore why the US dollar stands strong globally, from forex dominance to leading GDP. USD showcases strength against major currencies like JPY, GBP, and EUR, solidifying its pivotal role in the world's economic system.

Source: Bloomberg

Data current as of 2/21/2024

Key points

  • Dollar holding strong against Japanese yen: (1:01)
  • USD trending higher since 2021: (2:17)
  • Interest rate differentials helping US dollar: (3:45)
  • US leads in economic production: (4:42)
  • USD close to highs against GBP, EUR: (6:06)

The strength of the US dollar relative to other currencies is a multifaceted issue that reflects various economic, political, and market dynamics. While it's challenging to declare any currency the "strongest" outright due to differing criteria for measurement, the US dollar (USD) holds significant influence and demonstrates robustness across several parameters.

Dominance in Forex Markets

The US dollar's performance against major currencies such as the Japanese yen (JPY), the British pound (GBP), and the euro (EUR) suggests a period of pronounced strength. For instance, USD/JPY has been trading consistently above 150.00 for the past week, nearing 30-year highs around 151.50. Similarly, the dollar's relative proximity to historic highs against the pound and euro underscores its strength in recent times.

Economic Indicators and Global Position

The strength of the dollar is also supported by the United States' lead in economic production. Holding a significant lead in Gross Domestic Product (GDP) over the next highest producers - China and the Euro Area - highlights the US's dominant economic position. Such leadership often translates into currency strength due to the underlying economic stability and growth prospects.

Recent Trends and Market Sentiment

The USD's trending higher since 2021 and hitting multi-decade highs on several occasions against major currencies reflects a broader confidence in the US economy and its currency. Market sentiment towards the dollar, influenced by interest rate policies, geopolitical stability, and comparative economic performance, contributes to its strength.

While the US dollar showcases attributes of a strong currency, especially in its recent performance against other major currencies and its underpinning by the largest GDP, its designation as the "strongest" currency can vary based on the metrics used. However, its enduring influence in global finance and its role as a reserve currency further cement its status as a pivotal currency in the world's economic system.

How to trade US dollar

  1. Open an account to get started, or practice on a demo account
  2. Choose your forex trading platform
  3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex broker like IG. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.

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