Monday, February 25, 2008

Dollar

United States dollar
For details of current paper money and coins, see Federal Reserve Note and Coins of the United States dollar.
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Aruban florinBahamian dollarBahraini dinarBarbadian dollarBelize dollarBelarusian rubleBermudian dollarCayman Islands dollarCuban convertible pesoDjiboutian francEast Caribbean dollarEritrean nakfaHong Kong dollar (narrow band)Jordanian dinarLebanese poundMaldivian rufiyaaNetherlands Antillean guldenOmani rialQatari riyalSaudi riyalUnited Arab Emirates dirham
The dollar (currency code USD) is the unit of currency of the United States. The U.S. dollar has also been adopted as the official and legal currency by the governments in a few other countries. The U.S. dollar is normally abbreviated as the dollar sign, $, or as USD or US$ to distinguish it from other dollar-denominated currencies and from others that use the $ symbol. It is divided into 100 cents.

Adopted by the Congress of the Confederation of the United States on July 6, 1785,[2] the U.S. dollar is the currency most used in international transactions.[3] Several countries use the U.S. dollar as their official currency, and many others allow it to be used in a de facto capacity.[4] In 1995, over US $380 billion were in circulation, two-thirds of which was outside the United States. By 2005, that figure had doubled to nearly $760 billion, with an estimated half to two-thirds being held overseas,[5] representing an annual growth rate of about 7.6%. However, as of December 2006, the dollar was surpassed by the euro in terms of combined value of cash in circulation.[6] Since then the current value of euro cash in circulation has risen to more than €695 billion, equivalent to US$1,029 billion at current exchange rates.[7]

Contents
1 Overview
2 Etymology
2.1 Nicknames
3 Dollar sign
4 History
4.1 Continental currency
4.2 Silver and gold standards
5 Coins
6 Banknotes
7 Value
7.1 Factors influencing the price
7.2 Time-relative value
8 International use
8.1 Dollar versus euro
8.2 The dollar as the major international reserve currency
8.3 US Dollar Index
8.4 Dollarization and fixed exchange rates
9 Exchange rates
9.1 Historical exchange rates
10 See also
11 References
12 External links
12.1 Images of U.S. currency and coins

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Article Excerpt
IT IS TIME the United States wakes up to a serious problem. The dollar is increasingly losing the position it has enjoyed for nearly half a century as the world's currency of last resort. And as that happens, the advantages we have gleaned from that status--the ability to finance our twin fiscal and trade deficits while keeping our interest rates low--will also be lost. And yet no one, particularly in Washington, seems overly concerned. The world is awash in dollars right now, and the situation cannot last. My concern is that many in this country continue to have unrealistic views about the sustainability of the status quo. Yes, our domestic economy is doing reasonably well--we have modest but real growth, inflation is quiet, the stock market is booming. But we also have not done anything to address an out-of-control federal government budget deficit and the ongoing huge trade deficits we run up with other nations. How long will other countries continue to provide us with our credit card? Other countries may no longer be willing to provide Washington with a blank check--literally. China's enormous trade surpluses with the United States have generated more than one trillion dollars worth...NOTE: All illustrations and photos have been removed from this article.

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China Ends Fixed-Rate Currency
Administration Hails Policy Shift
By Peter S. GoodmanWashington Post Foreign ServiceFriday, July 22, 2005; Page A01

SHANGHAI, July 21 -- China on Thursday took an important step forward in its move toward a market economy, announcing it would increase the value of its currency, the yuan, and abandon its decade-old fixed exchange rate to the U.S. dollar in favor of a link to a basket of world currencies.

The evening announcement on state television delivered China's first concrete move toward allowing the yuan -- also known as the renminbi -- to eventually float freely at the whim of global traders.

Currency Evaluation
The Goal
Under a "float," which China says it wants someday, a currency rises and falls on global markets according to supply and demand. This is the system that applies to many major currencies such as the U.S. dollar, the euro and British pound.

The Old System
Under a "peg," which China has had since 1995, the currency's value is fixed - in China's case, at 8.28 yuan per U.S. dollar.

The New System
Under a "managed float," which China adopted yesterday, the currency can rise and fall but only within prescribed limits.

THE WASHINGTON POST
Friday, 11 a.m. ET
Chinese Currency ChangeMarc Miles, director of the Center for International Trade and Economics at The Heritage Foundation, discusses China's announcement Thursday that it will no longer tie the value of its currency to the U.S. dollar.
Background
China's Currency May Float a Little
Senators Told China Will Loosen Policy On Currency
China Rejects Global Pressure To Change Policy on Currency
Washingtonpost.com Talk
Share Your Thoughts

,'China on Thursday took an important step forward in its move toward a market economy, announcing it would increase the value of its currency, the yuan, and abandon its decade-old fixed exchange rate to the U.S. dollar in favor of a link to a basket of world currencies.','Peter S. Goodman') ;


The move eased tensions between China and the United States on a key source of trade friction. The White House, pressured by manufacturers and vocal members of Congress, has lobbied China to raise the value of its currency, arguing that a low-priced yuan has unfairly kept Chinese goods artificially cheap.

The Chinese move was welcomed heartily by the Bush administration.
"They've put in place a mechanism that provides room for significant movement over time in the currency, and they've expressed a commitment to using market forces to let the currency move," Treasury Secretary John W. Snow said at a news conference. "I think today's developments are extremely positive."

China's most strenuous critics in the United States have demanded that Beijing increase the value of its currency by at least 10 percent. Sens. Charles E. Schumer (D-N.Y.) and Lindsey O. Graham (R-S.C.) have been pressing a bill that would impose across-the-board punitive tariffs of 27.5 percent against Chinese imports if China does not substantially raise the value of the yuan. Last month, the two senators delayed the vote after saying they had been assured by Snow and Federal Reserve Chairman Alan Greenspan that a Chinese revaluation was imminent.

The details of China's announced shift fell short of their demands. In a statement posted on its Web site, China's central bank said it would on Friday free the yuan to rise to 8.11 from its current 8.28 to the dollar -- an increase of about 2.1 percent. The bank also said it would allow the yuan to move within a trading range of 0.3 percent above or below the previous day's closing price, continuing its "managed float" policy.

The change garnered measured praise from Schumer: "It is smaller than we hoped," the senator said in a news conference. "But to paraphrase the Chinese philosophers, a trip of a thousand miles can well begin with the first baby step. And the fact that they have opened the door to future increases of 0.3 percent makes us feel and hope that this is not the last."

Analysts said Thursday's movement was probably only the beginning of a series of measures that will eventually allow the yuan to move in a broader trading band with other currencies and to float freely -- albeit not for several years.

"The new managed floating currency regime is just an interim system," said He Fan, an economist at the Chinese Academy of Social Sciences in Beijing. "There is a chance of a further widening of the band in the not-distant future, but it will go step by step."

Others suggested that Beijing was not likely to move again anytime soon. "I believe this revaluation will stay in place for the next 24 months," said Yu Nanping, an economist at East China Normal University in Shanghai.

In a sign of China's regional economic influence, Malaysia on Thursday followed with its own announcement that it, too, is allowing its currency, the ringgit, to float within a proscribed trading band. By contrast, Hong Kong announced it would retain its currency peg to the U.S. dollar.
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The Euro as an International Currency: An Evaluation of the Challenge to the Dollar Based on Currency Reserves and the Exchange Rate Ekaterina Kouznetsova, B.A. (Awarded in 2007)Economics
Adviser: Matteo Iacoviello
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ABSTRACT:
Since its launch, the euro has successfully achieved the status of an international currency, and the prospect of its ability to challenge the dollar is increasingly credible. This paper supplements the ongoing academic discussion by reevaluating the characteristics necessary for such a position in light of the most recent information available on the euro area, and then providing econometric evidence as support. I regress the lags of shares of dollar and euro reserves on the current shares and predict steady state values for each currency. I then regress the same lags, as well as the exchange rate lag, on the change in the euro/dollar exchange rate. I find, first, that the share of euro reserves, while still not as high as the share of dollars, is nonetheless significant: about 26%. Second, the euro/dollar exchange rate is only slightly affected by changes in the share of either currency’s reserves. I conclude that confidence in the euro as an alternative international currency is growing, and that the euro has become a real challenge to the dollar.


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The US dollar, the euro, and the yen: An evaluation of their present and future status as international currencies

Beckmann, Rainer, Born, Jürgen and Kösters, Wim (2001): The US dollar, the euro, and the yen: An evaluation of their present and future status as international currencies. Published in: IEW Diskussionsbeiträge 38 (2001)
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Abstract
The process of European integration and especially the introduction of the euro as the single currency for up to now 12 member countries of the EU in 1999 may alter the existing clear currency hierarchy. The euro area is comparable in size to the US with respect to GDP and even exceeds the US regarding the share in world trade. Thus questions arise of whether the international monetary system turns out to be bipolar in the long run or whether the yen can also play its part.It turns out that real activity, size and sophistication of financial markets, monetary and financial stability and inertia are the most prominent characteristics making a currency to be preferred on a world-wide level.We thus conclude that the integration and the development of European financial markets are of special importance for a stronger international role of the dollar, but that the historical experience of only gradually changing supremacy of international currencies still applies.

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