Waltzing around exchange rates

As the textbooks say, money is a means of exchange, a unit of account and a store of value. When we discuss foreign exchange rates, we mean the value of our currency against a foreign benchmark. Since there are many such benchmarks or standards, we use the most common one, which is the US dollar. This is because the US dollar is the most widely used reserve currency, accounting for roughly two-thirds of global foreign exchange trading and official foreign exchange reserves.

Most people use the dollar standard because not only is it the most convenient, but also because by and large it has been a good store of value, at least relative to other currencies.

You will find it difficult (at times impossible) to exchange our currency in many parts of the world. But that will not be the case with the US dollar. The greenback is the reserve currency standard because it meets all the conditions of an international unit of account, means of payment and store of value.