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)

 

RELATED TERMS
  1. U.S. Dollar Index - USDX

    The U.S. dollar index is a measure of the U.S. dollar's value ...
  2. Reserve Currency

    A reserve currency is held by central banks and other major financial ...
  3. Currency Basket

    A currency basket is a group of currencies used to measure the ...
  4. National Currency

    A national currency is a legal tender issued by a central bank ...
  5. Reciprocal Currency

    In the foreign exchange market, a currency pair that involves ...
  6. Monetary Reserve

    A monetary reserve is a central bank's holdings of a country’s ...
Related Articles
  1. Investing

    How Gold Affects Currencies

    Learn about the strong correlation between gold's value and the strength of currencies trading on foreign exchanges.
  2. Trading

    Play Foreign Currencies Against The U.S. Dollar And Win

    Don't panic when the dollar drops. Learn to exploit the greenback's decline and profit from it.
  3. Trading

    The U.S. Dollar's Unofficial Status as World Currency

    Discover how and why the U.S. dollar emerged as official currency in many foreign countries.
  4. Trading

    Profiting From a Weak U.S. Dollar

    Learn how to allocate your investments when the U.S. dollar is down.
  5. Trading

    The U.S. Dollar: What Every Forex Trader Needs To Know

    The U.S. dollar is by far the most significant currency in the global market. Find out what you need to know if you want to trade it.
  6. Insights

    The Go-To Currency In 50 Years

    Discover why the euro will likely become heir to the currency throne.
  7. Tech

    Countries That Use The U.S. Dollar

    Here are the territories and countries that use the U.S. dollar as their official or quasi official currency.
RELATED FAQS
  1. Is there a world currency? If so, what is it?

    There is no such thing as a world currency. However, since World War II, the dominant or reserve currency of the world has ... Read Answer >>
  2. What are key economic factors that can cause currency depreciation in a country?

    Read about the causes of currency devaluation, and find out how to differentiate between relative and absolute currency devaluation. Read Answer >>
  3. What is foreign exchange?

    Foreign exchange is the conversion of a country's currency into another. In a free economy, a country's currency is valued ... Read Answer >>
  4. How do you make money trading money?

    Trading money, particularly in the forex market, is a speculative risk, as you are betting that the value of a currency will ... Read Answer >>
  5. What countries have the largest gold reserves?

    Find out which countries have the largest gold reserve stockpiles, and learn why governments still feel that it's necessary ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  2. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  3. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  4. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  5. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  6. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
Trading Center