Introduction
We live in the world whereby the monetary systems that make the dollar an official reserve currency. For the last five year the dollar has been sliding up and down, and this brings the question; what exactly makes the value of currency to rise or fall? The reason is that price is set minute by minute by traders and investors who make bets on which way the market prices direction of currency. Since the year 2011 the dollar has been rising. The last time the dollar went down was in February 2002 when it fell by 9.5% all the way through to June that is when it increased by 1.8 %.
Discussion on rises and falls in the value of the dollar for the last five years
The value of the dollar measured in three ways the: exchange rates, Treasury notes and foreign currency reserves which are a number of dollars held by foreign countries. Trends in the recent past five years using the three measurements of the showed an increase in the dollar for the last five years. The reasons behind the rise of the dollar are:
1. The dollar is a refuge during any global crisis which means that investors purchase U.S Treasuries to avoid risks as they are trying to avoid whatever happened in the year 2008. In this year there was a severe financial crisis and recession.
2. China's economic reform led to slower economic growth in the year 2015.