Has "King Dollar" been demoted to a Prince? Nice chart showing all major currencies and their ranking in terms of use in international transactions....

Here is a chart showing a list of currencies and their ranking in terms of use to facilitate a whole host of international transactions, such as the buying and selling of goods and services, or physical and/or financial assets. (The chart is from HERE with a HT from The Conversable Economist.)

The US dollar is still by far the most desired "medium of exchange" for engaging in international trade.

With most major commodities such as oil and agricultural products, US dollars are used to between the countries trading, even if the countries themselves do not use the US dollar as the currency of record.

In other words, if Russia sells oil to China the transaction is conducted in US dollars, not Rubles or Renminbi.

One interesting note from the chart is since 2001 the share of US dollars used in international transactions has decreased a bit but the use of the Chinese Renminbi has increased dramatically, moving from 35th place to 9th place in a relatively short period of time.

Source: 

Triennial

Central Bank Survey 

Foreign exchange 

turnover in April 2013: 

preliminary global 

results 

If the use of the US dollar in international transactions has declined since 2001, we might expect the value of the dollar to fall as well.  Not to imply correlation is causation, but the graph below shows how the value of the US dollar has changed compared to a "basket of other major currencies".

Using 2001 as a base year, the dollar has declined in value roughly 21%.

Has "King Dollar" been demoted to "Prince"? Not yet, but he should be looking over his shoulder.

Is the US dollar a "safe-haven" currency anymore? King Dollar may be demoted to Prince in the future...

This article in the WSJ today emphasizes one of the determinants that cause an increase in the demand for a particular currency: A currency as a "safe-haven" against loss or depreciation. 

If a holder of a particular currency is unsure of its immediate or future value, they may elect to exchange it for a currency they believe will, at the minimun, maintain its value.

According to the article, there is not a firm consensus as to which currency is a dependable safe-haven. The dollar historically has played this role, but not so much today. 

Investors Show a Yen for the Dollar

""There may be no lack of investors seeking safety, but there is a shortage of safe havens in the currency market.

That was in evidence during Thursday's global rout in financial markets, when just about the only islands of strength were the U.S. dollar and the yen.

It isn't lost on investors that both the U.S. and Japan have significant fiscal and economic woes. But when markets turn scary, the ease of trading in both countries' currencies and in their deep underlying bond markets overwhelms those longer-term concerns.

The Swiss franc, long a traditional safe haven, has been largely taken out of the equation by the Swiss National Bank's efforts to cap the currency's rise, and it declined about 1% against the dollar Thursday. Even gold fell 3.7% on Thursday, as investors cut back on positions after the metal's long march higher. Currencies recently touted as safe havens, such as the Norwegian krone and Swedish krona, both lost about 2% against the dollar.

In times of trouble, "at the end of the day you just buy dollars," says Gravelle Pierre, founder of Iron Harbor Capital Management. ""

Getting medical care for peanuts. No, really, getting medical care for peanuts..It is a sign of the times...

This is what happens in the extreme when people and institutions lose faith in the currency.  Zimbabweans have essentially abandoned their currency and are using various commodities for exchange purposes.  Local heathcare providers have established a price list  that gives a commodity-to-US Dollar "exchange rate"...See photo below...

NYTIMES: Zimbabwe Health Care, Paid With Peanuts

""People lined up on the veranda of the American mission hospital here from miles around to barter for doctor visits and medicines, clutching scrawny chickens, squirming goats and buckets of maize. But mostly, they arrived with sacks of peanuts on their heads....""



NYTIMES