The world loves the U.S. dollar.
When, say, a South African businessman buys supplies from China, he pays in U.S. dollars. When central banks hold foreign reserves, they favor dollars. And, all over the world, when things start to get crazy, people start putting $100 bills under the mattress.
In fact, as of 2011, roughly two-thirds of all $100 bills were held outside the U.S., according to an estimate by Ruth Judson, an economist at the Fed.
In a recent paper on foreign demand for U.S. currency, Judson writes:
First, international demand for U.S. currency increased steadily over the 1990s and into the early 2000s, a period that coincided with the fall of the Berlin Wall, the collapse of the Soviet Union, and periodic economic and political crises in several Latin American countries.
Second, international demand for dollars began to stabilize or decline around the time of the introduction of the cash euro in 2002. This decline coincided with economic and political stabilization and financial modernization in many economies in and around the euro zone and the former Soviet Union and continued until late 2008, when the global financial crisis appeared to spark renewed demand for U.S. banknotes that has shown no sign of abating.