Foreigners investing dollars, instead of selling them, keeps the dollar's price higher than if it resulted only from relative international values of goods and services. Our central bank, the Federal Reserve, acts on interest rates, affecting the price of a dollar. These kinds of government actions, directed at the domestic economy, affect international money. The dollar is special. Trading one foreign currency for another often requires owning dollars in between.
Governments hold international reserves mostly in dollars.
The dollar's international role limits Federal Reserve power over domestic dollars. That role also puts the world at risk of unwelcome U.S. economic policies. The author, a graduate of Princeton's Woodrow Wilson School of Public and International Affairs, is an independent researcher and writer.