- July 2014
- Posted By Ninoslav
- 0 Comments
People always want a safe transaction to give a perfect value of money to remain positive. But many times you get confused in this volatile market due to fall of domestic currency. As the dollar and some other currencies have a great impact on this global market, hence people want to substitute their domestic currency with these currencies and hence the process is known as dollarization.
In this process a trader may substitute his currency fully or partially. Fully currency substitution in Dollar takes place mostly in small countries where the value of local currency is responsible for their volatile market. In this case you need to know about the full-dollarization. The local currency of a country uses US dollars exclusively to minimize their risk.
What is the need of dollarization for a country?
The country always wants to get an economic strength. It is stable for a country to get secured. The most important currencies which have a good stability in market are euro, US dollar, New Zealand dollar, Indian rupee, Australian dollar, Swiss franc, Israeli Shekel, Russian Ruble, Armenian dram and Turkish lira. A developing transitional with high inflation is completely beneficial to the market.
- Trade and Investment – In this the transaction cost will be reduced when both countries use same rate.
- On exchange rate policies – The financial system between two countries will be more deepen.
- On banking system- In banking system the currency replacement get affected by local currency which sometimes has a great risk.
Hence, it will be beneficial when dollarization takes place and people will be eager to know “How foreign exchange autotrading supports to the investor”.