Reply #1: A lot of it also has to do with [View All]

the stability of the US (you want your reserve currency to be something that dosen't fluctuate wildly, and thus it makes sense to invest in a big, powerful country that you can count on being there in the future.) Thus the sheer importance of the US over the past 50 years has pretty much insured it's status as a reserve currency. Of course the current government's complete disregard of both the trade and budget deficits helps to push down the dollar, and gives foreign countries which want to protect the value of their monetary reserves a strong incentive to diversify. Thus Bush, and the nation may wind up shooting themselves in the foot.

At this point the dollar is largely being propped up by Asian countries which are buying US debt in an attempt to peg their currencies to the $ (if they don't their goods become more expensive in the US and their economies suffer.) However if any of these countries stop--and South Korea announced it was diversifying it's currency holdings a few days ago-- it could spark a big dollar selloff, raise the price of foreign manufactures in the US, drive up interest rates, and cause quite a bit of trouble to the world economy.