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Global Strength Of The US Dollar At Risk, Crash In Value Speculated After End Of Petrodollar Deal, Russia Banning USD & Euro Trading

Global Strength Of The US Dollar At Risk, Crash Speculated, After End Of Petrodollar Deal, Russia Banning USD & Euro Trading In Stock Exchange

There is wide speculation of a global weakening and imminent crash in the value of the United States Dollar after the US-Saudi Arabia petrodollar deal was not renewed at its expiration on June 9, after 80 years.

The US dollar enjoyed further world dominance as the most accepted global currency following the petrodollar deal which was initiated on June 8, 1974.

The agreement facilitated the exchange of US dollars for crude oil exports and saw crude oil-producing countries earn US dollars via exportation.

Also, the Petrodollar deal was struck to allow the United States a steady supply of crude oil and a market to buy its debt and demand for its currency. In return, Saudi Arabia would get military aid and equipment.

According to financial analysts, the stability of the value of the US dollar might be at risk now as a result of the nation going off the gold standard – used to peg the value of a currency. This was done following the signing of the petrodollar deal.

With the deal now gone, Saudi Arabia can now seal their crude oil in exchange for currencies like the Chinese yuan, Russian rubles, Japanese yen, Euros, etc.

According to MSN, “The petrodollar’s expiration could weaken the U.S. dollar and, by extension, the U.S. financial markets. If oil were to be priced in a currency other than the dollar, it could lead to a decline in global demand for the greenback. This, in turn, could result in higher inflation, higher interest rates, and a weaker bond market in the United States”.

The American dollar might have also received a blow from Russia stopping the trading of the USD and Euro on their stock exchange. This came after the United States announced a new financial punishment for Moscow by sanctioning its stock market and clearing house for foreign currency transactions.

In a statement, Moscow’s Central Bank announced that “due to the introduction of restrictive measures by the United States against the Moscow Exchange Group, exchange trading and settlements of deliverable instruments in U.S. dollars and euros are suspended”. The UK also announced on Thursday, that it was sanctioning the Moscow stock exchange, in line with the United States.

It, however, assured its people of the safety of their USD and Eur monies. “Companies and individuals can continue to buy and sell U.S. dollars and euros through Russian banks. All funds in U.S. dollars and euros in the accounts and deposits of citizens and companies remain safe,” it said.

According to Moscow Exchange (MOEX), the Chinese Yen has surpassed the US dollar as the most traded currency. In May, it represented about 53.6% of the trade, amplifying the ties between Russia and China.

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