Understanding External Currency: Impacts on Global Trade and Economic Stability

Introduction

The global economy is intricately woven together through complex financial systems, with currency acting as the primary medium of exchange. External currency, often defined as the currency that is used beyond the borders of its home country, plays a critical role in shaping international trade dynamics and influencing economic stability. This report aims to explore the impacts of external currency on global trade and economic stability, examining the mechanisms through which external currencies operate, their influence on exchange rates, and their broader implications for nations participating in the global marketplace.

The Role of External Currency in Global Trade

External currencies, particularly those that are widely accepted in international transactions, such as the US dollar, euro, and yen, serve as a backbone for global trade. The use of a common currency facilitates transactions between countries, reducing the costs associated