The United States dollar is the most traded currency on the foreign exchange market. Despite a slight decrease in its shares after the introduction of the Euro, it remained by far the most popular currency on the market. The data for 2013 when the euro was in existence for more than 10 years suggests that USD still constitutes an overwhelming majority of daily transactions. forex trading. (Source: “Report on global foreign exchange market activity in 2013 – Triennial Central Bank Survey” published by Bank for International Settlements.)
Most traded currencies in 2018:
| Position | Currency |
| 1 | United States dollar |
| 2 | Euro |
| 3 | Japanese yen |
| 4 | Pound sterling |
| 5 | Australian dollar |
In the ten most traded currency pairs in 2018, all but one EUR=GBP involve USD, so it is obvious that US dollars are involved.
- EUR/USD
- USD/JPY
- GBP/USD
- AUD/USD
- USD/CAD
- USD/CNY
- USD/CHF
- EUR/GBP
- USD/MXN
- USD/SGD
Short facts about the United States Dollar
| ISO 4217 code | USD |
| Numerical ISO 4217 code | 840 |
| Symbol | $ or US$ |
| Central banking system | The Federal Reserve System |
| Main unit and subunits | 1 dollar = 100 cents
1 cent = 10 mill |
| Nickname | Buck |
The Federal Reserve System
The US has chosen a slightly different option, namely the Fed’s Federal Reserve System, in anticipation of having a European Central Bank.
The Federal Reserve System (FRS) wields a lot of power, since its decisions do not require approval from any part of the executive or legislative branches of government. To prevent the congress from trying to indirectly control the FRS through budget decisions, the FRS is self-financed.
The Federal Reserv System includes both a Federal Reserve Board (FRB) and a Federal Open Market Committee (FOMC).
- FRB is comprised of seven members. The President of the United States appoints each of these seven. The members shall have a wide range of presidential and legislative terms, with the President being only able to nominate a new Member if there is a vacancy. Thus, sitting members can’t be removed by the President and replaced with his preferred ones.
- FOMC is comprised of the seven FRB members + 12 presidents of regional Rederal Reserve Banks. Only five of the twelve regional bank presidents are allowed to vote at any given time.
The Federal Reserve System also includes representation from both the state and private sectors. The Federal Reserve System was set up in 1913 as part of the Fed Act, which also laid down three central objectives to financial policy: maximisation of employment, stabilisation of prices and moderate long term interest rates. The Federal Reserve has been interpreting this as a mandate for promoting low, stable inflation rates rather than trying to keep inflation at zero since the 1970s.
The United States Department of the Treasury
The U.S. Department of the Treasury is separate and independent from the Federal Reserve System, a setup that is highly unusual from a global perspective. The department has responsibilities for things like printing and issuing U.S. currency, handling Government debt instruments, licensing and supervising banks as well as management of government revenue. In 1789, a law of Congress established the Department of Treasury; that is to say, it was over thirty years ahead of its Federal Reserve counterpart.
Official currency
In many countries of the world, despite another currency being an officially recognised one, the United States dollar receives widespread acceptance and is deemed to be a de facto currency by some. Even while they do not belong to the United States of America or its overseas territories, a handful of countries have taken it further and are actually adopting the dollar as their official currency.When a country declares the USD their official currency in this fashion, the country does not gain any right to issue USD or elect representatives for the Federal Reserve System.
Examples of countries and territories outside the United States of America and its Overseas Territories where the USD is the only official currency are El Salvador, Special municipalities of the Netherlands for the Marshall Islands, Palau, Micronesia, the Turks and Caicos Islands, the British Virgin Islands and the Caribbean. Ecuador, Panama and East Timor are examples of countries with more than one official currency and where one of those currencies is the USD.