USD — The U.S. Dollar
What is USD?
USD is the three-letter currency code for the U.S. dollar, the official currency of the United States and the world’s dominant reserve currency. It’s managed by the Federal Reserve and is the most traded currency on global foreign-exchange markets. The dollar is also used as legal tender in a few other countries and is widely accepted in international transactions.
Key takeaways
- USD is the standard abbreviation and uses the symbol $; one dollar = 100 cents.
- U.S. banknotes currently circulate in $1, $2, $5, $10, $20, $50, and $100 denominations; coins include 1¢, 5¢, 10¢, 25¢, 50¢, and $1.
- The dollar transitioned from commodity-backed standards (gold/silver) to a free-floating fiat currency in the 20th century.
- The USD is the most traded currency globally and serves as a primary reserve asset for central banks.
A brief history
The U.S. dollar became the nation’s official currency in the late 18th century. Paper currency was introduced in the 19th century. Over time congressional acts and monetary reforms changed the dollar’s design and backing. The U.S. gradually moved away from gold convertibility (notably under policies in the 1930s and the definitive end of Bretton Woods-era gold convertibility in the early 1970s). Since then, the USD has been a fiat, free-floating currency and the predominant global reserve currency.
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How the USD’s value is measured
- U.S. Dollar Index (USDX): tracks the dollar’s strength against a basket of major trading-partner currencies (largest weight: euro, followed by yen, pound, Canadian dollar, krona, and franc). The index rises as the dollar strengthens and falls as it weakens.
- Money-supply measures: the monetary base (M0) counts physical currency in circulation. Broader aggregates like M2 include deposits and near-money instruments and reflect the expanded money supply under the fractional-reserve banking system.
Advantages of the USD
- Long-term price stability relative to many other currencies.
- Consistent acceptance as legal tender and in international transactions.
- Widely held by foreign governments and central banks, often in the form of U.S. Treasury securities, which supports global liquidity and confidence.
- Central role in global commodity pricing and international finance.
Example: Petrodollars
Much of global oil trade is priced in dollars. Revenues in USD earned by oil-exporting countries are commonly called “petrodollars.” Those nations often convert or reinvest dollar balances via foreign-exchange markets or by purchasing U.S. Treasuries, reinforcing global demand for USD.
FAQs
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How much USD is in circulation?
There are trillions of dollars in physical currency in circulation, while broader measures of U.S. money supply (like M2) total many times that amount. -
How many U.S. dollars to buy one euro?
Exchange rates fluctuate. A commonly quoted range in recent years has been near parity (around 1 USD ≈ 1 EUR), but check live market rates for current values. -
What is USDCoin (USDC)?
USDC is a stablecoin—a cryptocurrency pegged to the U.S. dollar—intended to maintain a value close to $1. It is not issued by the U.S. government and is not legal tender.
Final note
The USD’s global role stems from its liquidity, institutional backing, and long-standing use in trade and finance. Exchange rates and money-supply figures change over time, so consult current sources for up-to-date numerical data.