The US dollar is the currency of the United States of America and is abbreviated as $, USD or US$. It is also known as the
'greenback'. The US currency is an important international reserve currency, along with the Euro. Its accumulation exceeds twice
that of the Euro, comprising over 60% of the world’s foreign exchange reserves.
The US coins in circulation are:
1˘ (one cent) - also referred to as a penny
5˘ - nickel
10˘ - dime
25˘ - quarter
50˘ - half dollar or fifty-cent piece
$1 - dollar or dollar coin
US Currency: History
In March 1900, the US followed the gold standard and fixed the value of the US dollar at $20.67 per ounce of gold.
The Great Depression of the early 1930s forced the major nations, including the US, to abandon the gold standard.
In the mid-twentieth century, the Bretton Woods system was adopted, valuing all currencies in terms of the US dollar.
The greenback began to freely float in the forex market in 1971. The US dollar strengthened with Saudi Arabia agreeing to
denominate oil trade exclusively in dollars. The strength of the US dollar grew after 2003, when it constituted 80% of world
trade transactions and over half of world exports. All loans and forwards made by the International Monetary Fund (IMF) being
in US dollars added to the currency’s significance.
US Dollar: During Recession
The US dollar had been considered as the best currency to hold during turbulent economic and political conditions. However, a
number of factors exerted pressure on the US dollar during the 2007-2009 global economic recession. These include:
1. Increasing concern over terrorism,
2. Fears surrounding a weakening US economy,
3. US military troubles overseas,
4. Rising US current account deficit, and
5. Diminishing investor confidence due to low interest rates.
Dollarization
The US dollar has been adopted by a number of countries as their official currency. This dollarization was adopted for
increased financial security. The dollarized economies are:
British Virgin Islands
East Timor
Ecuador
El Salvador
Marshall Islands
Federated States of Micronesia
Palau
Panama
Pitcairn Islands
Turks and Caicos Islands
While some nations have accepted the US dollar as their official currency, the greenback is a de facto currency in several
nations. A de facto currency is one that is not a legal tender in a particular country, but is widely accepted by people. The
other common de facto currency is the Euro.
US Dollar Exchange Rate
The table shows the exchange rate trends of the US dollar against other major currencies (as on January 1):
| 1 US$= |
2005 |
2006 |
2007 |
2008 |
2009 |
| Euro |
0.738662 |
0.844452 |
0.757748 |
0.684791 |
0.718442 |
| GBP |
0.521921 |
0.581801 |
0.510569 |
0.503956 |
0.684041 |
| Yen (100) |
102.68 |
117.88 |
119.02 |
111.71 |
90.79 |
| CHF |
1.1412 |
1.3148 |
1.2195 |
1.1329 |
1.0673 |