US Dollar

The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally.

It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century.

The US dollar, also informally known as the greenback, is the world’s most foremost reserve currency, due in large part to the importance of the US economy on the world stage.

Once backed by gold (in the 1900’s), the USD is now a purely fiat currency, i.e. not backed by a physical commodity.

The former gold standard aligned to the US dollar, made both gold and silver the legal-tender coinage of the USA, with the guarantee that 1 USD could be converted to one and a half grams of pure 24 carat gold.

However, the gold link was eventually abolished by President Richard Nixon in 1971. Since the gold standard was cut, the US dollar has become the world’s number one reserve currency.

This means foreign nations possess large amounts of their cash reserves in USD, accounting for approximately 65% of the world’s foreign exchange reserves.

How to Trade the US Dollar?

The US Dollar is traded in a variety of ways, most notably on the foreign exchange (forex) market versus other currencies; traded as pairs.

Any retail broker offers exposure to the USD in many exchange pairs, given its popularity and liquidity.

The USD is involved in the majority of the most traded forex pairs, such as the EUR/USD, the USD/JPY, the GBP/USD and the USD/CHF, known as the “four majors”, and the “commodity pairs”, i.e. AUD/USD, USD/CAD and the NZD/USD.