Why businesses outside of the US should use USD
November 6, 2019
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Benefit from the security of the American dollar’s stable exchange rate
Greenbacks, bucks, benjis, bones. The American dollar’s nicknames may have changed wildly since its inception in 1792, but its value has seen unprecedented stability.
USD is one of the most stable currencies in the world. Despite recent trade tiffs, the United States has a strong and steady dollar which rarely fluctuates in value.
USD is considered a world reserve currency, meaning it’s widely accepted outside of the United States. Other countries tend to maintain USD reserves because they believe the currency will hold its value (much like a stable stock, for you investors out there). Other popular world reserve currencies include the euro and the Japanese yen.
It's here: The Definitive Guide to Foreign Exchange for 2019.
While the American dollar holds no official titles, its position as the most used currency in the world makes it a de facto global currency. In fact, according to the International Monetary Fund, USD made up 61% of central bank foreign exchange reserves. That means that over half of the foreign currencies held by international banks (outside of the States) are in USD. Clearly, the global financial system is confident in the enduring value of the American dollar.
Clearly, USD isn’t only for Americans. It’s the official currency in the British Virgin Islands, the Caribbean Netherlands, Ecuador, El Salvador, Micronesia, Panama, Turks and Caicos, and Palau. If you’re travelling or doing business abroad, you’re likely able to use USD.
But if your business isn’t based in the United States, why would you use the US dollar? Besides the opportunity to stare at Abe Lincoln and other important US politicians, sending and receiving your payments in USD brings an assortment of benefits for SMBs.
Control your FX rate
A foreign exchange rate, or FX rate, is the amount of money one currency is worth in another currency. For example, one USD will buy you $1.30 in Canadian dollars, so the FX rate is 1.3. (This is a pretty simplified explanation: for more in depth information about FX rates, check out our detailed report).
Changing FX rates affect small businesses in a big way. Thanks to global shifts in economic policy, geopolitical conflicts, or trade wars, currency values (and their respective FX rates) are in constant flux. The rate you are quoted from your bank today may be different by tomorrow.
Keeping your international payments in USD, rather than exchanging them to your local currency immediately, allows you to wait for the best possible exchange rate.
SMB owners don’t need to accept the currency exchange rate from their bank: keeping your payments in USD lets you shop around for the best FX rate. After all, you didn’t work hard for your money only to give it to a bank or FX shop. A little patience can pay off in the long run.
Stable and Secure
Global business relationships may be the norm, but that doesn’t mean they are without risk. Countries (and the currencies attached to them) are constantly negotiating and renegotiating their position on the world stage.
For example, the UK’s pound sterling (more commonly called the pound) recently took a dive as a result of Brexit negotiations. This once stable and secure currency plummeted thanks to the uncertainty created by the UK’s proposed exit from the EU. Similar issues have occurred in China, Argentina, Iran, and Vietnam.
If you’re holding your money in a currency that suddenly loses value, it can negatively affect your business’s cash flow. Therefore, it’s a good idea to trade in a currency that has a low probability of reducing in value. Strong, stable currencies lend themselves to strong, stable businesses.
For security in your international business relations, it’s often beneficial to look outside your local currency, especially if you live in a region frequently affected by shifting geopolitical and macroeconomic factors.
How can I hold USD outside of the US?
“Wait,” you may be saying. Control over currency exchange rates and increased stability sounds great, but I’m not in the US and I’m not a US citizen, so how can I have an American bank account?
Financial technology (fintech) allows individuals from around the world to do business in USD.
See how Veem can make your business payments simple. LEARN MORE
For example, Veem’s Wallet feature allows users to transfer, receive, and hold funds in USD outside of the US. With your Veem Wallet, you could receive a payment in USD, pay bills in USD, or simply hold your funds until your local currency’s FX rate is more favorable.
Just like a wallet in your pocket, your funds will remain in your electronic Veem Wallet until you are ready to use them, either by depositing to your bank, or sending to another bank account. Leave the volatility of wire transfers behind, and start controlling your FX rate.
Veem’s Wallet feature brings the stability and security of the American dollar to SMBs around the globe. Contact our client services representatives to learn more about how to set up your Veem Wallet.
Simplify your business payments with Veem.