why is that in GDRs only US dollars are accepted?
Dear Student,
This is a good question. Have you ever thought of it? Well, there lies a simple reason for it. We know that US economy is the most powerful economy, therefore, its currency that is US Dollar is regarded as the most stable and reliable currency worldwide. The international credit rating and credit worthiness of US economy are pretty high in the international finance market.
'No matter what happens, US Dollar is the safest option'- this faith in investors' minds prevails. Hence, this is the reason why these receipts are denoted in US Dollars.
Now, let me put a food for thought to you. Think why Pound (1 Pound = 1.61 US Dollar) and Euro (1 Euro = 1.29 US Dollar) despite being more powerful than US Dollars do not have role in GDRs? This is simply because of the reliability and faith on US Dollar.
Good!! Keep posting!!
This is a good question. Have you ever thought of it? Well, there lies a simple reason for it. We know that US economy is the most powerful economy, therefore, its currency that is US Dollar is regarded as the most stable and reliable currency worldwide. The international credit rating and credit worthiness of US economy are pretty high in the international finance market.
'No matter what happens, US Dollar is the safest option'- this faith in investors' minds prevails. Hence, this is the reason why these receipts are denoted in US Dollars.
Now, let me put a food for thought to you. Think why Pound (1 Pound = 1.61 US Dollar) and Euro (1 Euro = 1.29 US Dollar) despite being more powerful than US Dollars do not have role in GDRs? This is simply because of the reliability and faith on US Dollar.
Good!! Keep posting!!