ABSTRACT
Since the end of World War II, Western international monetary relations have been guided by the Bretton Woods Agreements. This agreement established a system of fixed exchange rates based on the full convertibility of the dollar into gold at the rate of 35 dollars an ounce. As the United States agreed to offer gold for dollars to foreign governments or central banks at this rate, foreign countries considered the American currency as good as gold or even better than gold, since dollar holdings could be invested carrying interest earnings, while gold did not give the same opportunity. As a consequence, many countries found it convenient to accumulate dollars as a supplementary reserve asset, running balance of payments surpluses with the United States. US dollars, therefore, became the key currency of the international monetary system and the predominant part of the international reserves for many countries.1
