United States Dollar (USD)
The U.S. dollar is the world's foremost reserve currency. It is also used as the standard unit of currency in international markets for commodities like gold and oil. Some economists note that the overseas demand for the dollar allows the U.S. to maintain persistent trade deficits without causing the value of the currency to depreciate. The level of interest rates, the trade deficit and the flow of foreign investments in to the U.S. all partially affect the value of the dollar on the international scene.
Federal Reserve policy is the leading factor determining money supply in the United States. The "Fed", as it is commonly known, controls the three tools of monetary supply: open-market operations, the discount rate and reserve requirements.
Commercial banks must hold as reserves a fraction of the deposits they accept, which may be held as cash or deposits at Federal Reserve banks. The Federal Reserve lends money to banks and changes the "Federal Reserve discount rates" on the loans and by "open-market operations."
The U.S. dollar index gives the relative strength of the dollar. The Index is a statistical index that reflects the strength or weakness of the trend of the US Dollar. The larger the index figure, the stronger the Dollar, or vise-versa. The weakness of the Dollar over the last two decades is mostly attributable to the world's low opinion of fiscal policies resulting in large budget deficits.
Dollar trivia: referring to the dollar as a "buck" dates back to the mid-1700s when buckskin was used as a currency in trading.
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