Dollar-denominated

Referring to financial instruments, transactions, or assets whose value is expressed and settled in United States dollars (USD). This signifies that the price, payment, or value of the item is quoted in USD, and the exchange of money, goods, or services is ultimately measured in terms of the dollar's equivalent. It's a crucial term in international finance, particularly for debts, investments, and trade involving parties in different countries, as it allows for a common valuation framework and often reduces currency exchange risk for the involved parties.

Dollar-denominated meaning with examples

• Many international companies issue dollar-denominated bonds to tap into the large US investor base. These bonds provide a stable investment option as the interest and principal are paid in USD. For example, a company in Germany might issue dollar-denominated bonds even though its revenues are in Euros, to attract American investors.
• A large portion of global oil trade is conducted in dollar-denominated contracts. This means that oil prices are set and payments are made in US dollars, regardless of the country that is buying or selling the oil. This use of the dollar is a significant factor in its status as a world reserve currency.
• Foreign governments often hold significant reserves of dollar-denominated assets, such as US Treasury bonds, to manage their currency exchange rates and provide financial stability. Their central banks choose US dollar-denominated assets as safe investment options in times of economic uncertainty.
• Businesses operating across borders frequently use dollar-denominated invoices for transactions. For instance, a software company in India might invoice a client in Canada in USD, simplifying accounting and eliminating the complexities that result from varying exchange rates.