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The US dollar is the most popular currency and is considered a benchmark in the forex market against which most other currencies are traded. Its currency code is the USD and its symbol is ‘$’. Other names for the currency include greenback, buck, scrillas, paper and green.

The official currency of the USA and its territories, it is also the most important reserve currency – a reflection of the perceived strength and stability of the US economy. Almost every central bank around the world holds some amount in US dollars, further reinforcing the strength and popularity of the currency. In addition, the USD is the standard currency in the commodity market as well, with leading commodities’ prices traded in dollars.

Owing to its importance, the US dollar has its own index, USDX, which measures the value of the USD against a basket of six leading currencies representing the US’s main trading partners. The USDX is measured against the values of the Euro (EUR), Pound Sterling (GBP), Japanese yen (JPY), Swiss franc (CHF), Canadian dollar (CAD) and the Swedish krona (SEK).

The exchange rate of USD-related currency pairs fluctuates in times of global political and economic uncertainties, as the reserve currency enjoys somewhat of a safe haven status in the forex market. In such times, the currency rate of the USD strengthens, making gains against other leading currencies, especially the ones that are considered riskier, e.g. commodity currencies and emerging market currencies.

The exchange rate of the US dollar-driven currency pairs also sees significant fluctuation on the release of key economic data from the US, including GDP, NFP report, inflation, consumer confidence, retail sales, business sentiment, housing market data and manufacturing activity reports. In addition, any changes to the monetary policy and interest rates by the Federal Reserve – the central bank of the US, also drive movement in the conversion rate of currency pairs that feature the US dollar, offering forex traders ample opportunities to generate profits in the market.