United States dollar
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| United States dollar | |
|---|---|
| Name | United States dollar |
| Local name | USD |
| Iso code | USD |
| Subunit name | cent |
| Subunit ratio | 100 |
| Issuing authority | United States Department of the Treasury, Federal Reserve System |
| First issued | 1792 |
| Pegged by | none |
United States dollar is the official currency of the United States and its territories, issued in coin and banknote form by the United States Mint and the Bureau of Engraving and Printing under authority of the United States Congress and managed in monetary policy by the Federal Reserve System. It functions as the primary unit of account, medium of exchange, and store of value within the United States while also serving as a dominant international instrument in trade, finance, and reserves. The dollar’s symbols and institutions—such as the "$" sign, the Treasury Department, and the Federal Reserve Board—are widely recognized across central banks, markets, and international organizations.
History
A national currency was authorized by the Coinage Act of 1792, creating the dollar as legal tender alongside coinage produced by the United States Mint. Early circulation included Spanish silver pieces called "pieces of eight" that circulated with newly struck United States dollar coinage during the era of the First Bank of the United States and the Second Bank of the United States. The Civil War prompted the issuance of United States Notes and the expansion of National Banking Acts; later, the Gold Standard Act of 1900 formalized parity with gold. The 20th century saw major shifts: the Federal Reserve Act (1913) established the Federal Reserve System; the Bretton Woods Conference (1944) anchored the dollar to gold and made it a linchpin of postwar finance; and President Richard Nixon ended dollar convertibility to gold in 1971, effectively completing the transition to a fiat currency alongside changes under Montagu Norman-era central banking practices and international institutions such as the International Monetary Fund.
Design and denominations
Coins are struck in denominations ranging from the cent to the dollar, including historic denominations such as the half cent and designs like the Morgan dollar and the Saint-Gaudens double eagle. Modern circulating coins include cent, nickel, dime, quarter, half dollar, and one-dollar pieces, bearing motifs of presidents and national symbols tied to the United States Mint programs such as the Presidential $1 Coin Program and the America the Beautiful Quarters. Banknotes are issued in denominations of 1, 2, 5, 10, 20, 50, and 100 dollars featuring portraits of figures such as George Washington, Thomas Jefferson, Abraham Lincoln, Alexander Hamilton, and Benjamin Franklin. Commemorative and bullion issues—such as American Eagle (coin)s and American Silver Eagle—serve collectors and investors, while series names (e.g., Series 2009, Series 2013) reflect signature changes and design updates authorized by the Secretary of the Treasury.
Production and security features
Paper currency is produced by the Bureau of Engraving and Printing with intaglio printing, microprinting, security threads, and color-shifting inks introduced in modern series to deter counterfeiting, alongside watermark portraits and embedded security fibers. Coinage production employs minting processes at United States Mint facilities in Philadelphia, Denver, San Francisco, and West Point using alloy compositions and reeded edges to assist authentication and vending compatibility. Anti-counterfeit initiatives have involved collaboration with the United States Secret Service, international law enforcement agencies such as Interpol, and standards bodies including the European Central Bank—notably for cross-border counterfeit information exchange. Technological upgrades have mirrored developments in machine readability for Automated Teller Machine (ATM) networks, financial market infrastructure overseen by entities like The Clearing House and Federal Reserve Bank of New York, and currency-design research coordinated with the Smithsonian Institution for numismatic preservation.
Circulation and legal status
Legal tender statutes were enacted by Congress and interpreted in case law by the Supreme Court of the United States; coins and Federal Reserve notes are legal tender for debts public and private under statutes administered by the United States Treasury. Currency circulates through banking channels such as commercial banks regulated by the Office of the Comptroller of the Currency and cleared through systems including the Federal Reserve System’s payment networks and private clearinghouses. Outside the mainland, territories such as Puerto Rico, Guam, American Samoa, and the U.S. Virgin Islands use the dollar as their official currency; additionally, freely convertible regimes and dollarized economies (e.g., Ecuador, El Salvador) accept dollar-denominated transactions under various agreements or unilateral adoption. Domestic monetary policy decisions affecting circulation—reserve requirements, open market operations, and interest rate policy—are executed by the Federal Open Market Committee.
Economic role and exchange rate
The dollar serves as the invoicing and settlement currency for a large share of global commodities and financial contracts, influencing terms in markets such as commodities traded on exchanges including the New York Mercantile Exchange, treasury markets centered on the United States Department of the Treasury’s securities, and interbank funding markets involving institutions like JPMorgan Chase and Citigroup. Exchange rates are determined in foreign exchange markets involving central banks such as the People's Bank of China and the European Central Bank, multinational corporations like ExxonMobil and Apple Inc., and currency traders on platforms such as Chicago Mercantile Exchange. U.S. monetary and fiscal policy, geopolitical events involving entities like NATO or leaders such as Joe Biden, and macroeconomic indicators reported by agencies like the Bureau of Labor Statistics and the Bureau of Economic Analysis drive fluctuations in the dollar’s nominal and real exchange rates.
International use and reserve currency status
The United States dollar is the principal reserve currency held by many central banks, including the People's Bank of China, Bank of Japan, and Bank of England, and it underpins international finance through institutions such as the International Monetary Fund and the World Bank. Dollar-denominated assets like U.S. Treasury bonds and U.S. dollar LIBOR-linked contracts factor into global liquidity, while swap lines between central banks—such as arrangements involving the Federal Reserve and the European Central Bank—support dollar funding. International initiatives, treaties, and forums such as the Group of Twenty and the Bretton Woods Conference historically shaped the dollar’s global role; contemporary debates about reserve diversification involve actors like Goldman Sachs and BlackRock and alternative currencies promoted by states including Russia and China.