“Instead, it’s the extent to which the market remains dollar-centric.” Source

Continuing with the same article.

Consider this: When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter. Indeed, the dollar is virtually the exclusive vehicle for foreign-exchange transactions between Chile and Korea, despite the fact that less than 20% of the merchandise trade of both countries is with the U.S.

The article makes it easy to miss the economic logic of South Korea and Chile trading in Dollars. Although US trade comprises less than 20% of the total for South Korea and Chile, that small basket provides information for those countries to arbitrage better deals elsewhere. This in turn reindexes prices in the US to reflect those transactions happening elsewhere.

As Cushing, Oklahoma, reflects the exchange of oil, currencies reflect the exchange of the broadest possible range of goods and services. Cushing became an index because at the margin of oil trading, that delivery point aggregates the information most relevant to the next transaction to occur.

Even with less than 20% of South Korean or Chillean trade, the US market still best reflects changes in the bids and offers happening elsewhere. However there are cultural, not just economic, factors as well. Considering the recent Academy Awards in Hollywood, how many people in Chile or South Korea do business in the same industry and also speak Chinese?

Reports over food safety in China, as well as the fact that the US represents much of the world’s marginal food production and arable land, also favor continued use of the US Dollar in international trade.

However, medium of exchange arguments aside, the role of the USD as a safe store of value is still very much in doubt.