Explain what is a “vehicle currency.” Why is the U.S. dollar considere

Explain what is a “vehicle currency.” Why is the U.S. dollar considered a vehicle currency?

What will be an ideal response?

ANSWER

A vehicle currency is one that is widely used to denominate international contracts made by parties who do not reside in the country that issues the vehicle currency. Since in 2004, nearly 90 percent of foreign exchange transactions involve exchanges of foreign currencies for U.S. dollars; therefore, it is considered a vehicle currency.