The United States dollar (USD) is widely regarded as the most influential and widely used major currency in the world.
As the primary global reserve currency, it plays a central role in international trade, investment, and finance. The dollar is held by central banks across the globe, used as the standard for commodity pricing (particularly oil and gold) and dominates global forex markets. Its widespread acceptance and stability make it a preferred foreign currency for cross-border transactions, international debt issuance, and safe-haven investment during times of economic uncertainty.
The prominence of the United States dollar and its exchange rates, reflects not only the size and strength of the economy of the United States of America, but also decades of financial and geopolitical influence.
USD: A brief history
The US (United States) dollar has a long and influential history that began with the Coinage Act of 1792, which created the United States Mint and established the dollar as the official currency of the new republic.
The dollar was modelled on the widely trusted Spanish milled dollar silver coins, which circulated heavily in the American colonies and was known for its consistent silver content (also considered one of the first international currencies due to its uniformity in silver content, standard, and milling characteristics).
Early US currency followed a bimetallic standard, meaning it was backed by both gold and silver, but debates over the gold-to-silver ratio led to instability and eventually a shift toward the gold standard in the 19th century.
In 1913, after repeated banking crises, the Federal Reserve System was created to manage monetary policy and stabilise the overall economy.
Following World War II, the United States played a central role in forming the Bretton Woods Agreement (1944), which pegged major world currencies to the US dollar (itself convertible to gold), establishing the United States dollar as the world's primary reserve currency. It also saw the creation of key financial institutions: the International Monetary Fund (IMF) – to oversee currency stability, emergency financing, and international cooperation – and the World Bank – to support post-war reconstruction and economic development.
In 1971, under President Richard Nixon, the United States abandoned the gold standard, making the dollar a fiat currency backed by the strength of the US economy rather than precious metals. Since then, the dollar has become the most widely used currency in global trade, finance, and foreign exchange reserves.
Currency symbol
The symbol for the US dollar is the dollar sign ($), one of the most recognisable financial symbols in the world.
Its exact origins are debated, but one common theory is that it evolved from the Spanish “peso” abbreviation ‘Ps’, which gradually merged into an S with a vertical line through it.
In modern use, the $ symbol is placed before the numerical amount (e.g., $100) and is used not only in the United States but also in other countries that use currencies called dollars, such as Canada and Australia. However, in international contexts (especially in finance, trade, and currency markets) the ISO code "USD" is often used to distinguish it from other dollar-based currencies.
ISO code
The US dollar is identified internationally by the ISO currency code USD.
"USD" stands for "United States Dollar" and is used in global finance, trade, banking, and foreign exchange currency markets to clearly distinguish the US dollar from other global currencies.
For example, CAD refers to the Canadian dollar, and AUD refers to the Australian dollar. The ISO code is especially important in contexts where the dollar sign ($) alone would be ambiguous. On trading platforms, banking statements, invoices, and international contracts, "USD" is the standard and unambiguous way to reference the American currency.
Denominations
The US dollar is issued in both coins and paper banknotes.
US paper money is issued by the Federal Reserve and printed by the Bureau of Engraving and Printing. However, US coin money is issued by the United States Mint, a bureau of the Department of the Treasury.
The most commonly circulated banknote denominations are: $1, $5, $10, $20, $50, and $100.
- The $2 bill (although still legal tender) is rarely used and often kept as a novelty.
- Notes above $100, such as $500, $1,000, $5,000, and $10,000, were printed historically but have been discontinued and are no longer in circulation.
Currency subunit
The cent is the official subunit of the US dollar, with 100 cents equaling one dollar.
The cent is represented by the ¢ symbol, although this is now rarely used in favour of expressing cents in decimal form (e.g., $0.25 for 25 cents).
Common coin denominations include: 1¢ (penny), 5¢ (nickel), 10¢ (dime), 25¢ (quarter), 50¢ (half dollar).
While cents are still used in everyday transactions, particularly in cash purchases, their role is gradually diminishing as electronic payments increase and inflation reduces their purchasing power.
Official name and common nicknames
The official name of the currency is the United States dollar, but it is universally referred to simply as the dollar.
However, over time, the currency has picked up a number of slang terms and nicknames.
The most commonly used is "buck", which dates back to the early American frontier era, when deerskins (or buckskins) were used as a unit of trade. The term "greenback" arose in the 19th century, referring to the green-coloured paper notes introduced during the Civil War.
Individual denominations also have their own nicknames. The $1 bill is sometimes called a "single" or "George" (after George Washington), while the $5 bill may be called an "Abe" or "Lincoln". The $10 bill is often referred to as a "Hamilton", the $20 bill as a "Jackson", and the $100 bill is famously known as a "Benjamin" due to the portrait of Benjamin Franklin.
Central bank
The Federal Reserve System, often called the Fed, is the central bank of the United States and the issuer of the US dollar.
Established in 1913 through the Federal Reserve Act, the Federal Reserve was introduced to bring greater stability, flexibility, and cooperation to the banking system, following a series of financial panics.
The Federal Reserve System has a unique structure, comprising 12 regional Federal Reserve Banks, overseen by the Board of Governors in Washington, D.C.
The Federal Reserve is tasked with managing monetary policy, regulating banks, maintaining financial system stability, and providing financial services to the government and commercial banks.
The Federal Reserve controls the money supply and interest rates, making it one of the most influential financial institutions in the world. Its decisions on monetary policy, such as changes to the federal funds rate, have global implications for markets and economies.
Read more about the Federal Reserve's interest rate decisions here - When is the next Fed interest rate decision?
Common USD forex trading pairs
The US dollar is the most traded currency in the foreign exchange (forex) market, involved in nearly 90% of all forex transactions worldwide.
Its dominance is due to the dollar’s role as the world’s primary reserve currency and a benchmark for global trade and finance.
In forex, currencies are traded in currency pairs, and the USD is frequently positioned as either the base currency or the quote currency.
Major USD forex pairs
These are the most liquid and widely traded currency pairs in the world, each pairing the USD with another major global currency:
- EUR/USD – Euro / US dollar (most traded forex pair globally)
- USD/JPY – US dollar / Japanese yen
- GBP/USD – British pound (pound sterling)/ US dollar
- USD/CHF – US dollar / Swiss franc
- AUD/USD – Australian dollar / US dollar
- USD/CAD – US dollar / Canadian dollar
- NZD/USD – New Zealand dollar / US dollar
These pairs are known for high liquidity, tight spreads, and constant market activity, making them popular with both institutional and retail traders.
USD commodity forex pairs
In addition to the major pairs, the USD is frequently traded in commodity-linked pairs (commodity currency), as many global commodities are priced in dollars:
- USD/NOK – US dollar / Norwegian krone
- USD/SEK – US dollar / Swedish krona
- USD/RUB – US dollar / Russian ruble
- USD/ZAR – US dollar / South African rand
These pairs are often influenced by commodity prices like oil, gold, and natural gas.
Because of the USD’s central role in global finance, movements in dollar-based pairs often reflect broader economic trends, geopolitical developments, and changes in US Federal Reserve policy.
