The dollar, on one side of most trades made:the world's reserve, and widely paid.
United States dollar: the world’s primary reserve currency and the most traded currency in the forex market.
The USD is on one side of most forex transactions.
In plain words
USD is the international code for the United States dollar. It is the currency most widely held by central banks as reserves, the one in which commodities such as oil and gold are usually priced, and the most traded currency in the world.
See it move
USD and EUR
Why it matters
Because the dollar is one side of most currency trades, news about the United States economy and its central bank, the Federal Reserve, tends to move many pairs at once. The pairs that combine the dollar with another heavily traded currency are known as the majors.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
EUR/USD goes from 1.1000 to 1.1110 at the same time as USD/JPY goes from 150.00 to 148.50.
- 1EUR/USDup 0.0110, and 0.0110 ÷ 1.1000 = 1%.
- 2USD/JPYdown 1.50, and 1.50 ÷ 150.00 = 1%.
- 3In EUR/USD the dollar is the quote currency, so a higher price means a weaker dollar; in USD/JPY it is the base currency, so a lower price also means a weaker dollar.
Both moves show the dollar losing about 1%, although one chart went up and the other went down.
A common mistake
A climbing chart does not always mean a stronger dollar. It depends on whether USD is the first or the second code in the pair.
Check yourself
Educational information, not investment advice or a recommendation to trade.