US Dollar (USD)

The US Dollar (USD) is the world's primary reserve currency, held in central bank reserves globally and used to price most commodities including oil, gold, and wheat. Approximately 58% of global foreign exchange reserves are held in USD, and 88% of all forex transactions involve USD on one side of the trade.

USD's value is set by market forces, with the Federal Reserve's FOMC influencing it through interest rate decisions. The Fed's dual mandate — maximum employment and 2% inflation — drives its policy decisions. In 2022-2023, aggressive Fed rate hikes pushed the DXY (USD index) to 20-year highs, significantly impacting all emerging market currencies including INR and PKR.

The petrodollar system is a key structural support for USD dominance. Since the 1970s, oil has been priced in USD globally, meaning every country that imports oil must hold USD reserves. This creates persistent demand for USD from every nation on Earth. While BRICS nations have discussed alternatives, USD's structural dominance remains intact.

For USD remittances to South Asia, the US has a large diaspora community — 4.4 million Indian-Americans send USD 32B+ to India annually, while ~500,000 Pakistani-Americans contribute to Pakistan's USD 27B remittance total. Wise, Remitly, and specialized services like ICICI Money2India offer the best USD/INR rates.