The United States dollar (USD) is the official currency of the United States and is the world's primary reserve currency. It is used in the majority of international transactions and is the benchmark against which other currencies are valued. The dollar is managed by the Federal Reserve System, which controls monetary policy including interest rates and money supply. The dollar's status as the global reserve currency gives the U.S. significant economic advantages, including lower borrowing costs.
Dollar (USD)
Definition
The United States dollar (USD) is the official currency of the United States and is the world's primary reserve currency. It is used in the majority of international transactions and is the benchmark against which other currencies are valued. The dollar is managed by the Federal Reserve System, which controls monetary policy including interest rates and money supply. The dollar's status as the global reserve currency gives the U.S. significant economic advantages, including lower borrowing costs.
Example
As of 2024, approximately 58% of global foreign exchange reserves are held in U.S. dollars. When you see oil priced at $80 per barrel or gold at $2,000 per ounce, these are denominated in USD. The dollar index (DXY) measures the dollar's value against a basket of six major currencies.
Key Points
- 1The world's primary reserve currency since the Bretton Woods Agreement (1944)
- 2Managed by the Federal Reserve through monetary policy
- 3The dollar index (DXY) tracks its value against major currencies
- 4A strong dollar makes imports cheaper but exports more expensive
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