Dollar-based

Dollar-based describes systems, transactions, or economies where the US dollar serves as the primary unit of account, medium of exchange, or store of value. It often implies dependence on, or measurement in terms of, the US dollar's value. This can pertain to currency exchange rates, financial instruments, commodity pricing, international trade, and economic policy. The term highlights the influential role the US dollar plays in global finance and commerce, affecting global trade patterns, investment decisions, and currency valuations. Its usage emphasizes the dollar's central role in setting standards or providing a reference point for valuations.

Dollar-based meaning with examples

• Many international oil contracts are dollar-based, meaning that the price of crude oil is denominated in US dollars. This is critical for importers and exporters worldwide, and impacts all of global market pricing. Fluctuations in the dollar's value directly affect the profitability of oil sales and purchases, creating risk for businesses.
• Emerging markets often have significant dollar-based debt. This leaves them vulnerable to currency devaluation, as a weaker local currency increases the cost of repaying those debts. The dollar's strength can therefore cripple economies with dollar-based debts.
• The value of gold is often quoted in dollar-based terms, even though gold itself is a commodity, not a currency. This historical trend means the dollar's perceived strength can also influence the price of precious metals.
• Companies with significant international operations might report their earnings in dollar-based financial statements for the sake of uniformity and comparability across geographic locations. These results enable effective comparisons.
• When analyzing exchange rates, the term is used when referring to fluctuations in currency pairs. For instance, if the Euro is 'dollar-based', this refers to it's valuation in terms of USD.