The performance of any economy depends on the performance of the trade dollar. A strong economy attracts worldwide investments because it is perceived as safe and can achieve a significant return on investment rates.
The US dollar has been the reserve currency for many years. Its fluctuation significantly affects the economies of different countries. In today’s market, the trade dollar value is at 109 and is expected to continue rising.
History of the Trade Dollar
The US trade dollar was minted in the US mint in the hope of competing with other silver trade coins popular in East Asia back then. The idea to mint the US dollar came about in the 1860s following a decline in silver’s price because of increased mining activities in the western US.
However, a bill providing issuance of the dollar was approved and signed in 1873. The act made the legal tender up to five dollars with reverse and reverse designs by William Barber selected. The obverse design had Liberty seated facing the left with an extended hand holding an olive branch over the sea, while the reverse had a bald eagle design.
The first trade dollars were struck the same year, most of which were sent to China. However, there emerged bullion producers who began converting huge silver amounts into trade dollars. These coins would then make their way into the national market, frustrating those who were paid for the coins as each was traded for less than one dollar.
This wide circulation led to the official demonetizing of the coins in 1876, although circulation continued. The trade dollar was re-introduced in 1965.
Factors That Go into the Value of Coins in Today’s Market
1. Demand and supply
The US creates a demand for dollars when it exports its services and products since buyers have to pay for them in dollars. The buyers are therefore forced to convert their local currency into dollars by selling their currency to buy dollars.
In addition, the US increases dollar demand when the government or large corporations issue bonds to raise capital. This is because the bonds are purchased by foreigners who need to make payments in dollars. The amount of dollars purchased depends on the trade value against the buyer’s currency.
When the US does these activities, it creates a demand for dollars, putting pressure on the supply, which causes the trade dollar value to increase significantly more than the currencies of the foreigners buying the dollars. In addition, the trade dollar is considered safe during global uncertainties, meaning its demand continues to increase despite the US economy’s performance.
2. Market psychology regarding the trade dollar value
When the US economy weakens, and the dollar consumption reduces because of rising unemployment, the US can face a sell-off, requiring it to return the cash from stocks and bonds sold to their local currency. So, if foreign investors buy back their local currency, the dollar is affected significantly.
3. Technical issues
The release of government statistics like GDP or payroll data allows you to understand the strength or weaknesses of the economy. In addition, seasonal factors like resistance and support levels can help predict future trade dollar value movements.
As a trader, you can use the above factors to make sell or buy decisions. Also, consider political stability, inflation, public debt, and trade surpluses or deficits to determine the trade dollar value and its exchange rates between currencies.