What is the 'USD (United States Dollar)'

The USD (United States Dollar) is the official currency of the United States of America. The United States dollar, or U.S. dollar, is made up of 100 cents and is presented with the symbol $ or US$ to differentiate it from other dollar-based currencies.

The U.S. dollar is considered a benchmark currency, and is the currency used the most in transactions across the world. In addition, it is used as the official currency in many countries outside of the U.S., while many others use it alongside their own as an unofficial currency.

BREAKING DOWN 'USD (United States Dollar)'

The United States dollar, often referred to as the greenback, was created through the Coinage Act of 1792, which specified that a dollar of currency would be equal to between 371 and 416 grains of silver, and an "eagle" (US$10) at between 247 and 270 grains of gold. Gold coins with equivalent weights were used, and based on this system, the value of the dollar (in purchasing power), would be equal to the purchasing power of the gold or silver on which it was based.

In 1933, gold coins were taken back, and the gold standard was changed, setting the price of a troy ounce to $35. This gold standard continued until 1968 when a series of pegs to gold were put in place until 1975. In January of 1975, the U.S. dollar was removed from the gold standard, and was allowed to float freely on the international currency markets.

USD International Role

The U.S. dollar is the most traded currency in the world. It is part of 85 percent of all trading transactions, more than double that of the euro, which is the second most traded currency. Such as its reach, the U.S. dollar has its own index, the USDX, which is a weighted value index against a basket of six other currencies; the euro, Japanese yen, British pound, Swiss franc, Swedish krona and the Canadian dollar.  

Furthermore, the U.S. dollar is the official currency of many Central American countries and republics including Puerto Rico, El Salvador, Guam, and the U.S. Virgin Islands. (See also: Countries That Use The U.S. Dollar)

 

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