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Economic concept
Dollar funding
Borrowing or obtaining dollars needed to finance assets, trade, or payments denominated in dollars.
All conceptsWhy does the dollar dominate the world?
US economic scale, legal and institutional credibility, open capital markets, and the supply of Treasury securities created a strong foundation. On top of it, a coordination loop developed: firms invoice in dollars because suppliers, customers, banks, and hedging markets already use dollars; that use deepens dollar funding and asset markets, making the next dollar transaction cheaper and safer. The loop is powerful, but it is conditional rather than permanent.
See it at workWhy does a stronger dollar squeeze emerging economies?
A stronger dollar can raise the local-currency burden of dollar debts and imported inputs. It also tends to coincide with tighter global financial conditions, so exposed firms and countries face pressure on both cash flow and refinancing.