The US central bank is called the Federal Reserve Bank (commonly referred to as "The Fed"). The USD is the most traded currency in the forex market and can be paired with all other major currencies. Common names for the USD include the greenback, buck, green, dough, smacker, bones, dead presidents, scrillas, and paper.
Importance of the US Dollar The US Dollar is the most commonly converted currency in the world and is regularly used as a benchmark in the Forex market. As the dominant global reserve currency, it is held by nearly every central bank in the world. Additionally, the Dollar is used as the standard currency in the commodity market and therefore has a direct impact on commodity prices.
Dollarization of the USD Due to its international acceptance, some countries like Panama and Ecuador use the USD as an official legal tender, a practice known as dollarization. For other countries the Dollar is an accepted alternative form of payment, though not an official currency for the country. Multiple currencies are pegged to the US Dollar:
Country Peg Rate Aruban or Dutch Guilder 1.79000 Bahamian Dollar 1.00000 Bahraini Dinar 0.37690 Barbadian Dollar 2.00000 Belizean Dollar 2.00000 Bermudian Dollar 1.00000 Cayman Island Dollar 0.82000 Cuban Convertible Peso 1.00000 Djiboutian Franc 177.721 Dutch Guilder 1.79000 East Caribbean Dollar 2.70000 Eritrean Nakfa 15.0000 Hong Kong Dollar 7.80000 Jordanian Dinar 0.70900 Lebanese Pound 1507.50 Omani Rial 0.38450 Panamanian Balboa 1.00000 Qatari Riyal 3.64000 Saudi Arabian Riyal 3.75000 United Arab Emirati Dirham 3.67250 Venezuelan Bolivar 6.30000Introduction of the US Dollar In 1785, the Dollar was officially adopted as the money unit of the United States. The Coinage Act of 1792 created the first U.S. Mint and established the federal monetary system, as well as set denominations for coins specified by their value in gold, silver, and copper. In 1861, the U.S. Treasury issued non-interest-bearing Demand Bills and the very first $10 Demand Bills, featuring Abraham Lincoln, went into circulation. These bills quickly earned the nickname 'Greenbacks' because of their color. In 1863, a national banking system was established and guidelines for national banks were created. These banks were authorized to issue national currency secured by the purchase of US bonds. In 1914, the first $10 Federal Reserve notes were issued.
Silver and Gold Standard in the US For years, the United States attempted to make a bimetallic standard, starting by adopting a silver standard based on the Spanish Milled Dollar in 1785. However, silver coins soon left circulation becoming completely suspended by 1806. By this time, most countries had already begun to standardize transactions by adopting the gold standard, meaning that any paper money could be redeemed by the government for its value in gold. The Bretton-Woods system was adopted by most countries to set the exchange rates for all currencies in terms of gold. Since the United States held most of the world's gold, many countries simply pegged the value of their currency to the Dollar. Central banks maintained fixed exchange rates between their currencies and the Dollar, turning the US Dollar into the de facto currency of the world. In 1973, the US finally decoupled the value of the Dollar from gold completely.
