Forex Salvador 2

Countries Using the U.S. Dollar.

Troy Adkins has 15+ years of residential property investment analysis experience and over a decade of institutional investment consulting experience.

Updated June 10, 2022.

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Reviewed by Michael J Boyle.

Michael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics.

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Fact checked by Yarilet Perez.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The strength of the American economy is one of the reasons why the U.S. dollar is the world's dominant currency.

The world's most commonly used currency, the dollar is also the world's reserve currency, meaning it's held in large quantities by central banks around the globe. Commonly known as the greenback, the U.S. dollar is also one of the most commonly traded currencies on the foreign exchange market.

Key Takeaways.

The first Federal Reserve Note was issued one year after the Federal Reserve was formed. Five U.S. territories and 11 foreign nations use the U.S. dollar as their official currency. The U.S. dollar is also used with local currencies in several different popular tourist destinations. The Bretton Woods Agreement pegged foreign currencies to the U.S. dollar to promote an efficient international monetary system. When the Bretton Woods Agreement terminated in 1973, the U.S. dollar remained the reserve currency for most nations.

Understanding the Countries That Use the U.S. Dollar.

The dollar is the official currency of several U.S. territories and other sovereign nations around the world. It's also the quasi-official currency of many other nations that, in addition to their local currency, commonly accept U.S. dollars.

If you're an avid traveler, someone who does business overseas, or an ex-pat, here is a comprehensive list of places around the world that use the greenback as an official currency.

Official Use of the U.S. Dollar.

The U.S.'s first Federal Reserve note, a $10 bill, was printed in 1914, one year after the Federal Reserve Bank was created. Although the $1 U.S. note was issued in 1862, it wasn't until 1963 when the $1 Federal Reserve note, featuring George Washington, was issued.

In 1944, the United States and its allies formed the Bretton Woods Agreement to create a new international trade and monetary system. Under the agreement, the International Monetary Fund (IMF) and the World Bank were created, and the U.S. dollar was established as the world's reserve currency. The world's central banks used fixed exchange rates between the U.S. dollar and their currencies.

By 1973, the Bretton Woods Agreement terminated. However, the U.S. dollar remained the reserve currency of many nations. The U.S. dollar remains the primary reserve currency because it is the most traded currency and the United States maintains a strong economy.

As of Dec. 31, 2022, approximately 50 billion notes of U.S. currency valuing $2 billion—are circulating outside of the U.S.

More than 65 countries peg their currencies to the U.S. dollar while five U.S. territories and eleven foreign nations use it as their official currency of exchange. The table below provides an overview of the U.S. territories and independent sovereign nations that use the U.S. dollar as their official medium of exchange.

Countries Where the U.S. Dollar is the Official Currency U.S. Territory or Foreign Country Relationship with United States Geographic Location Population (2022) Gross Domestic Product (2022) United States of America Federal Republic North America 331,501.08 $20.95 Trillion Commonwealth of Puerto Rico Unincorporated territory of the U.S. Northeastern Caribbean 3,281.54 $103.14 Billion Ecuador Independent country Northwestern South America 17,643.06 $98.81 Billion Republic of El Salvador Independent country Central America 6,486.20 $24.63 Billion Republic of Zimbabwe Independent country Southeast Africa 14,862.93 $18.05 Billion Guam Unincorporated territory of the U.S. Western Pacific Ocean 168.78 $5.84 Billion The Virgin Islands of the United States Insular area territory of the U.S. Caribbean 106.29 $4.07 Billion (2022) The British Virgin Islands British Overseas Territory Caribbean 30.24 Not Available Democratic Republic of Timor-Leste Independent country Maritime Southeast Asia 1,318.44 $1.90 Billion Bonaire Kingdom of Netherlands Municipality Caribbean 20,104 (2022) $553 Million (2022) American Samoa Unincorporated territory of the U.S. South Pacific Ocean 55.20 $709 Million Commonwealth of the Northern Mariana Islands Unincorporated territory of the U.S. Western Pacific Ocean 57.56 $1.18 Billion (2022) Federated States of Micronesia Six Sovereign Countries Subregion of Oceania 115.02 $410.08 Million Republic of Palau Island Country Western Pacific Ocean 18.09 $257.70 Million Marshall Islands Island Country Near Equator in the Pacific Ocean 59.19 $244.46 Million Panama Independent Country Central America 4,314.77 $53.98 Billion Turks and Caicos British Overseas Territory Caribbean 38.72 $924.58 Million Source: The World Bank, Long Reads CBS, World Population Review.

Although British territories, The British Virgin Islands and The Turks and Caicos adopted the U.S. dollar as their official currency because of their close relationship with the United States.

Quasi-Use of the U.S. Dollar.

The U.S. dollar is also widely used throughout the world as a quasi-currency of exchange. The U.S. dollar is not only widely accepted for commerce in both Canada and Mexico, but also in a host of tourist destinations including the Bahamas, Barbados, Bermuda, the Cayman Islands, Sint Maarten, St Kitts and Nevis, the ABC Islands of Aruba, Bonaire, Curacao, and the BES Islands including Bonaire, Sint Eustatius, and Saba, collectively known as the Caribbean Netherlands.

The U.S. dollar is also used as a quasi-currency in a variety of popular U.S. retirement destinations such as Belize and Panama, and some areas of Costa Rica. In Panama, for instance, the U.S. dollar is legal tender alongside the national currency, the Balboa, which is also worth US$1. The greenback is also accepted in Nicaragua.

The acceptance of the greenback can be tested in countries such as Myanmar, Cambodia, Liberia, major cities in Vietnam, and the Old City of Jerusalem.

Which Countries Use the U.S. Dollar As Their Official Currency?

In addition to five U.S. territories, 11 countries adopted the U.S. dollar as their official currency: Ecuador, El Salvador, Zimbabwe, The British Virgin Islands, The Turks and Caicos, Timor and Leste, Bonaire, Micronesia, Palau, Marshall Islands, and Panama.

What Strategies Does the U.S. Use To Deal With Countries that Undervalues Its Currency?

The U.S. government can impose tariffs and anti-subsidy duties on imported products to counter nations undervaluing their currency.

Is the U.S. Dollar Still the World’s Reserve Currency?

The U.S. dollar is still considered the world's reserve currency as the dollar is widely used globally and many nations hold large reserves of cash.

The Bottom Line.

The U.S. dollar is the most widely used currency in the world because of its stability and is likely to remain the global currency of choice until perhaps a global digital money system is patently accepted.

Travelers who plan on using the U.S. dollar outside the United States should notify their banking and credit card companies as a precaution to prevent frozen accounts due to suspicious overseas activities. Consumers should also inform their bank and credit cards regarding any foreign currency transaction fees.