Since WW II, Dollar has been enjoying the status of International currency for global trade. Though European Union agreed to launch their own currency called Euro but it could not succeed dollar. An international currency is the one which is globally accepted and dominates foreign exchange reserves. As of 2017, US dollar has been the most popular with 64% of reserves of central bank foreign exchange preceding Euro with 19.9 percent. It is the relative strength of US dollar in the market which makes it the most powerful currency in the world. Up to 40% international loan are issued and recovered in US dollar. There are up to $580 billion bills which are in use in the markets other than US. It is to be noted that there are 17 states which have recognized US dollar as their currency. The rise of globalization further strengthened the monopoly of US dollar in the market.
Furthermore, 90% of the foreign exchange market is dominated by US dollar while 10 % constitutes exchange of other currencies. Meanwhile, the financial crisis of 2008 alarmed the global financial markets which creates fear among major economies. In the wake of financial crisis, China and Russia called upon the need of independent international currency disconnected from any individual state.
The US sanctions on Iran and Russia has changed the dynamics of trade because both states meet energy needs more than quarter of the earth. US sanctions on others is considered a major threat to the position. It is to be noted that China feared if US dollar suffers set back, what would China does with billions of US dollars it would have. Turkey and Russia announced to trade in local currencies rather than US dollar. Iran later step in and announced to trade in local currency with Russia because of sanctions. Iran and Turkey are likely to continue trade in local currencies as Turkey imports 20% of its gas from Iran. European Union is developing mechanism to facilitate trade with Iran despite sanctions. This week, China and Pakistan announced to start trade in local currencies. It seems Asia as turning its back on US dollar which means it they do no longer consider US dollar a reliable currency. How US dollar is going to survive in long run would be clear with the passage of time but there is debate in international markets to trade commodities in local currencies