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What makes the dollar strong?

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Would dumping the Iran deal hurt the dollar?

Andy Uhler Sep 2, 2015
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Secretary of State John Kerry will speak in Philadelphia on Wednesday about the Iran nuclear deal, part of the Obama administration’s push to round up votes in Congress. One of the administration’s main arguments suggests the dollar is vulnerable as the world’s go-to currency if the U.S. goes it alone on rejecting the deal.

President Barack Obama says walking away would weaken U.S. credibility, not to mention create financial complications with markets around the globe if the U.S. unilaterally imposesd sanctions on Iran and its trading partners.

Cris Sheridan, senior editor for Financial Sense, says there’s been fear that the dollar will lose its reserve currency status for decades. But that assertion comes with some pretty big implications.

“To say the U.S., or the U.S. dollar is going to lose its reserve currency status is really to say that the U.S. is going to no longer be the world’s largest economy,” he says.

That would take a while, maybe decades. Backing out is sure to put the U.S. in an awkward position with its allies and international banks. But is it really as dire as Kerry suggests?

Jim Gelvin, history professor at UCLA, says the U.S. could certainly reprimand a country for trading with a nation that it has sanctioned. “But can we really sanction the British pound, the deutschmark, the franc, and the Chinese? It’s impossible.”

Kerry has pointed to Russia’s suggestion that continued sanctions could jeopardize the dollar’s dominant global position.

Correction: A previous version of this post misspelled Cris Sheridan’s name. The text has been corrected.

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