United States dollar

"USD" redirects here. For other uses, see USD (disambiguation).

This article is about general United States currency. For the dollar coin, see United States dollar coin.

The United States dollar (currency code USD) is the currency of the United States since 1785. It is normally abbreviated with the dollar sign $, or alternatively US$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents.

Adopted by the United States Congress in 1785, the U.S. dollar is today the most used currency in the world. Several countries use the U.S. dollar as their official currency, and many others allow it to be used in a de facto legal capacity. It is also used as a reserve currency by many countries. In 1995, over $380 billion USD were in circulation, of which two-thirds was outside of the United States. By April 2004, that figure had increased to nearly $700 billion [1], with an estimated half to two-thirds being held overseas [2].

Overview

The U.S. dollar uses the decimal system, consisting of 100 cents (symbol ¢). In another division, there are 1,000 mills or ten dimes to a dollar; additionally, the term eagle was used in naming gold coins. However, only cents are in everyday use as divisions of the dollar; "dime" is used solely as the name of the coin with the value of 10¢, while "eagle" and "mill" are largely unknown to the general public, though mills are sometimes used in matters of tax levies and gasoline prices. When currently issued in circulating form, denominations equal to or less than a dollar are emitted as U.S. coins while denominations equal to or greater than a dollar are emitted as Federal Reserve notes. (Both one-dollar coins and notes are produced today, although the note form is significantly more common.) In the past, paper money was occasionally issued in denominations less than a dollar (Fractional Currency) and gold coins were issued for circulation up to the value of twenty dollars.

U.S. coins are produced by the United States Mint. U.S. dollar banknotes are printed by the Bureau of Engraving and Printing, and, since 1914, have been issued by the Federal Reserve. The "large-sized notes" issued before 1928 measured 7.42 inches by 3.125 inches; small-sized notes, introduced that year, measure 6.14 inches by 2.61 inches.

One U.S. dollar (1917)

Notes above the $100 denomination ceased being printed in 1946 and were officially withdrawn from circulation in 1969. These notes were used primarily either in inter-bank transactions or by organized crime; it was the latter usage that prompted President Richard Nixon to issue an executive order in 1969 halting their use. With the advent of electronic banking, they became less necessary. Notes in denominations of $500, $1,000, $5,000, $10,000, and $100,000 were all produced at one time; see large denomination bills in U.S. currency for details.

United States coins

It has been suggested that this article or section be merged into United States coinage. (Discuss)

Main article: United States coinage

In normal circulation, there are coins in the denominations 1¢ (penny), 5¢ (nickel), 10¢ (dime), 25¢ (quarter), 50¢ (half dollar; uncommon), and $1 (uncommon).

Dollar coins have not been very popular in the United States. Silver dollars were intermittently created from 1794 through 1935; a copper-nickel dollar of the same large size was minted from 1971 through 1978. The Susan B. Anthony dollar coin was introduced in 1979; these proved to be unpopular because they were often mistaken for quarters, thanks to their nearly-equal size, their milled edge, and their similar color. Minting of these dollars for circulation ended in 1980 (collectors' pieces were struck in 1981), but, as with all past U.S. coins, they remain legal tender. As the number of Anthony dollars held by the Federal Reserve and dispensed primarily to make change in postal and transit vending machines had been virtually exhausted, additional Anthony dollars were struck in 1999. In 2000, a new $1 coin featuring Sacagawea was introduced, which corrected some of the mistakes of the Anthony dollar by having a smooth edge and a gold color, without requiring changes to vending machines which accept the Anthony dollar. However, this new coin has failed to achieve the popularity of the still-existing $1 bill and is rarely used in daily transactions. The failure to simultaneously withdraw the dollar bill and weak publicity efforts have been cited by coin proponents as primary reasons for the failure of the dollar coin to gain popular support. Some cynics also point out that the Federal Reserve makes more profit from dollar bills than dollar coins because they wear out in a few years, whereas coins are more permanent. As most vending machines are incapable of making change in banknotes, they commonly only accept $1 bills, though a few will give change in dollar coins. Also, some banks, such as Bank of America distribute dollar coins only through the same mechanisms as one would purchase foreign currency.

The United States has minted other coin denominations since 1793: half-cent, two-cent, three-cent, twenty-cent, $2.50, $3.00, $4.00, $5.00, $10.00, and $20.00. Technically, all these coins are still legal tender at face value, though they are far more valuable today for their numismatic value, and for gold and silver coins, their precious metal value.

The United States Mint also produces silver, gold and platinum bullion coins, called "American Eagles", all of which are legal tender though their use in everyday transactions is virtually non-existent. The reason for this is that they are not intended for use in transactions and thus the face value of the coins are much lower than the worth of the precious metals in them. The American Silver Eagle bullion coin is only issued in the $1 (1 troy ounce) denomination. The American Gold Eagle bullion coin denominations (with gold content) are: $5 (1/10 troy oz), $10 (1/4 troy oz), $25 (1/2 troy oz), and $50 (1 troy oz). The American Platinum Eagle bullion coin denominations (with platinum content) are: $10 (1/10 troy oz), $25 (1/4 troy oz), $50 (1/2 troy oz), and $100 (1 troy oz). The silver coin is 99.9% silver, the gold coins are 91.67% gold (22 karat), and the platinum coins are 99.95% platinum. These coins are not available from the Mint for individuals, but must be purchased from authorized dealers. The Mint also produces high quality "proof" coins, intended for collectors, in the same denominations and bullion content, which are available to individuals.

The largest denomination of currency currently printed or minted by the United States is the $100 bill and the $100 troy ounce Platinum Eagle.

International use

U.S. $100 Federal Reserve Note, featuring a portrait of Benjamin Franklin.

A few nations besides the United States use the U.S. dollar as their official currency, a process known as official dollarization. Ecuador (2000), El Salvador (2001), and East Timor (2000) all adopted the currency independently. The former members of the U.S.-administered Trust Territory of the Pacific Islands, which included Palau, the Federated States of Micronesia, and the Marshall Islands, chose not to issue their own currency after becoming independent (having all used the U.S. dollar since 1944). Panama also uses the U.S. dollar (since 1904), although it issues its own currency (coins only). Two non-U.S. dependencies also use the U.S. dollar: the British Virgin Islands (1959) and Turks and Caicos Islands (1973).

Additionally, the local currencies of Bermuda, the Bahamas, Panama, and a few other states can be freely exchanged at a 1:1 ratio for USD. The currencies of Barbados and Belize are similarly convertible at a 2:1 ratio. Argentina used a fixed 1:1 exchange rate between the Argentine peso and the U.S. dollar from 1991 until 2002. In Lebanon, one dollar is equal to 1500 Lebanese pound, and is used interchangeably with local currency as a de facto legal tender. The exchange rate between the Hong Kong dollar and the United States dollar has also been linked since 1983 at HK$7.8/USD, and Pataca of Macau, pegged to Hong Kong dollar at MOP1.03/HKD, indirectly linked to the U.S. dollar roughly at MOP8/USD. Several oil-producing Gulf Arab countries, including Saudi Arabia and Kuwait, also peg their currencies to the dollar, since the dollar is the currency used in the international oil trade.

The renminbi used by the People's Republic of China had been informally and controversially pegged to the dollar since the mid-1990s at Y8.28/USD until July 21, 2005. Likewise, Malaysia had pegged its ringgit at RM3.8/USD since 1997. However, on July 21, 2005, both countries removed their respective pegs and adopted managed floats against a basket of currencies.

The dollar is also used as the standard unit of currency in international markets for commodities such as gold and oil. Even foreign companies with little direct presence in the United States, such as the European company Airbus, list and sell their products in dollars, although some argue this is attributed to the aerospace market being dominated by American companies.

At the present time, the U.S. dollar remains the world's foremost reserve currency, primarily held in $100 denominations. The majority of U.S. notes are actually held outside the United States. Economist Paul Samuelson and others maintain that the overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate and the flow of trade to readjust.

Not long after the introduction of the euro (€; ISO 4217 code EUR) as a cash currency in 2002, the dollar began to steadily depreciate in value on the international scene. After the euro started to rise in value in March 2002, the U.S. trade and budget deficits continued to increase. By Christmas 2004 the dollar had fallen to new lows against all major currencies, especially its rival the euro. The euro rose above $1.36 /€ (under 0.74 €/$) for the first time in late December 2004, in sharp contrast to its lows in early 2003 (rate of $0.87/€). Beginning in late May into early June though the Dollar rose sharply against the Euro as European states reported stagnation in the overall European Union economy and doubts were raised over the EU Constitution which was voted down in two member states, France and The Netherlands. As unemployment rates rise in the Euro zone and economic growth slows the EU may see a drop in the value of the Euro against the Dollar.

Nicknames

The colloquialism buck is often used to refer to dollars of various nations, including the U.S. dollar. This term, dating to the 18th century, may have originated with the colonial fur trade. Grand, sometimes shortened to simply G, is a common term for the amount of $1,000. Banknotes' nicknames are usually the same as their values (such as five, twenty, etc.); however, the $1 bill is often called a single, and the $100 bill has gotten the nickname Benjamin (after the portrait of Benjamin Franklin that it bears) or a C-note (C being the Roman numeral for 100).

Origin of the name dollar

The United States dollar derives from the Spanish 8 reales coin which was composed of just under one ounce of silver. This coin was popular among American colonists, who called it the Spanish dollar, the name having derived from a German coin of similar size and composition known as the thaler. The first dollar coins issued by the United States Mint were of the same size and composition as the Spanish dollar and even after the American Revolutionary War the Spanish and U.S. silver dollars circulated side by side in the United States.

Although private banks issued currency backed by Spanish and U.S. silver dollars, the federal government did not do so until the American Civil War.

For further history of the name, see Dollar.

The dollar symbol

It has been suggested that this article or section be merged into Dollar sign. (Discuss)

Main Article: Dollar sign

There are various stories on origin of the "$" sign to represent "dollar." Because the dollar was originally the Spanish 8 reales coin, it is suggested that the 'S' derives from the number '8' which appeared on the coin. The most widely accepted explanation, according to the U.S. Bureau of Engraving and Printing, is that "$" is a corruption of the letters "PS" (for 'peso' or 'piastre' - especially the former, as each letter could represent each syllable of "Pé-So") written over each other in Spanish. Eventually, the 'P' was reduced to a vertical line - | - since the hump of the P disappeared into the upper curve of the 'S' anyway. Examination of old manuscripts yields support for this theory. The "$" symbol was widely in use before formal adoption of the Spanish dollar as U.S. currency in 1785.

The dollar sign is sometimes written with two vertical strokes. This is probably just a carry-over of the old habit of using three strokes to write the original sign: One stroke for the 'S' (it is physically easier to write the 'S' first, then the 'P'), a second stroke for the vertical line '|,' and then a third stroke for the hump of the 'P.' People in a hurry or were simply careless about making a perfectly formed 'P' probably just made the third stroke a second vertical line.

There are, however, a number of fanciful explanations for the second vertical line. One idea suggests that the double-line dollar sign originates from superimposition of the letters 'U' and 'S' (for United States; the bottom of the 'U' disappearing into the bottom curve of the 'S', effectively leaving two vertical lines that eventually merge into one as the sign '$'). Another theory is that the dollar sign harks back even to the most important Roman coin, the Sestertius, which had the letters 'HS' as its currency sign. Again, when superimposed, these letters form a dollar sign with two vertical strokes (the horizontal line of the 'H' mergeing into the 'S'). Lastly, it is sometimes said that the two vertical lines represent the two pillars of the original Temple of Solomon at Jerusalem. Neither of these stories holds up, however, first because these versions of the symbol pre-date the founding of the United States (whence came the notion of 'U' or 'H' superimposed over 'S'); and, second, because there is simply no evidence for these theories in the history of the Spanish coin. Rather, the 'US'-theory seems to trace to the traditions of Freemasonry; and, indeed, some Masonic symbols do appear on U.S. currency - but they did not in 1785.

A few people write the sign with one vertical stroke for small sums of money and two vertical strokes for large sums of money. (For example, five dollars with one stroke and one million dollars with two strokes.) However, this is only a matter of style, and it certainly has little to do with the original variation.

For further information about the symbol, see Dollar. See also Pieces of Eight.

Current USD exchange rates

AUD | CAD | EUR | GBP | BRL | A more comprehensive list of rates

See also

• Eurodollar
• Fiat currency
• Gold as an investment
• Silver as an investment

External links

• U.S. Bureau of Engraving and Printing
• The U.S. Treasury's Coins & Currency portal
• American Currency Exhibit at the San Francisco Federal Reserve Bank
• U.S. Treasury page with images of all current banknotes
• U.S. paper money
• Presidential currency
• Forex First dollar guide
• Ace Currency Calculator

Images of U.S. currency and coins

• U.S. Bureau of Engraving: Banknotes
• U.S. Mint: Image Library