United States Dollar (USD) Profile

What countries are using United States dollar currency?

The United States dollar, also referred to as the U.S. dollar or American dollar, is officially used by the United States of America and its unincorporated organized territories, including Puerto Rico, Northern Mariana Islands, U.S. Virgin Islands, Guam, American Samoa, and its unincorporated unorganized territories of the United States Minor Outlying Islands.

The United States dollar is the dominant reserve currency. The major reserve currencies are the United States dollar (USD), Euro (EUR), Pound sterling (GBP), Japanese yen (JPY), Swiss franc (CHF), and Canadian dollar (CAD). The two currencies of Special Drawing Rights (SDRs) and Chinese yuan (CNY) are proposed as the two newly added major reserve currencies. The US dollar and the Euro make up almost 90% of allocated Reserves globally, and the U.S. dollar itself gets almost a 60% share. Since the United States dollar is regarded as one of the most stable currencies, dollarization has been proceeding among many countries, which means the U.S. dollar has been used alongside with or instead of their domestic currencies.

EI Salvador and Ecuador have adopted the United States dollar (USD) as their sole legal tender and ceased to issue their domestic currencies. The Panamanian balboa (PAB) and the U.S dollar are both official currencies being used in Panama. Panama uses Panamanian balboa coins in addition to U.S. dollar coins, meanwhile, only the U.S. dollar banknotes are in circulation.

Most countries and territories use the United States dollar (USD) as de facto currency, either alongside with or instead of their domestic currencies.

United States dollar history

The United States dollar was created in 1792 and based upon the Spanish dollar. The Spanish dollar, also known as the piece of eight, was a silver coin and was worth eight reales. The Mexican peso was originally the name of the eight-real coins issued in Mexico by Spain. Therefore, the U.S. dollar and Mexican peso have the common origin of the Spanish dollar and both continue to use its “$” as a currency symbol. The three currencies of the Spanish silver dollars, the U.S. silver dollars, and the Mexican silver pesos remained in circulation as legal currencies in the United States since 1792 until the Coinage Act of 1857, which announced to forbid using foreign coins as legal currencies.

The U.S. dollar was first defined in bimetallism (silver and gold standards) as 371.25 grains (24.056 g) of silver or 24.75 grains (1.6038 g) of pure gold following a fixed 15:1 ratio of silver to gold.

The dollar was shifted in the gold standard to 23.2 grains (1.50 g) in 1834, and it was slightly adjusted to 23.22 grains (1.505 g) in 1837. The United States passed the Gold Standard Act in 1900, which defined gold as the only standard for redeeming paper money. The Act fixed the dollar's precise value at 25.08 grains of gold at 90% purity, equivalent to 23.22 grains (1.5046 g) of pure gold, and set $20.67 per 1 troy ounce of gold. Eventually, this gold standard was dropped in 1933.

In 1934, the dollar was defined at 13.71 grains (0.888 g) of gold. A new monetary management system, The Bretton Woods system, was established by 44 Allied nations in 1944, and it set the U.S. dollar as the gold standard currency. Under the system, the value of the U.S. dollar was anchored to the value of gold at $35 per ounce, meanwhile each country maintained its fixed exchange rate by tying its currency to the U.S. dollar. The two great international financial institutions of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD, former World Bank) were also established to manage the Bretton Woods system. The IMF guaranteed the U.S. dollar's convertibility into gold and maintained the system members' confidence in the U.S. dollar. The IBRD provided enough dollars as international liquidity. In 1971, the Bretton Woods system was ended, and the convertibility of the U.S. dollars to gold was terminated.

In 1973, the U.S. dollar was defined as 0.73662 g of gold and set the gold value at $42.22 per ounce. Including the United States, many countries quit the fixed exchange rate system and started to follow the floating exchange rates.

United States dollar coins and banknotes

The United States dollar is subdivided into 100 cents or 10 dimes. It was subdivided as 1000 Mill when the U.S. dollar was created; however, it has been withdrawn from circulation. Currently, frequently used coins are 1 cent, 5 cents, 10 cents (1 dime), 25 cents (quarter). Frequently used banknotes are 1, 5, 10, 20, 50, 100 dollars.

Currencies pegged to the United States dollar

The U.S.dollar was pegged by many currencies since it’s regarded as a stable currency.