Currency Conversion
United States Dollar (USD) - The United States dollar (sign: $; code: USD) is the unit of currency of the United States and is defined by the Coinage Act of 1792 to be between 371 and 416 grains (27.0 g) of silver (depending on purity). 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 (200 half-cents prior to 1857). The U.S. dollar is the currency most used in international transactions. Although U.S. dollar is a fiat currency, several countries use it as their official currency, and in many others it is the de facto currency.
The first dollar coins issued by the United States Mint were of the same size and composition as the Spanish dollar and even after the American Revolutionary War the Spanish and U.S. silver dollars circulated side by side in the United States. The coinage of various English colonies also circulated. The lion dollar was popular in the Dutch New Netherland Colony (New York), but the lion dollar also circulated throughout the English colonies during the seventeenth and early eighteenth centuries. Examples circulating in the colonies were usually worn so that the design was not fully distinguishable, thus they were sometimes referred to as "dog dollars".
The U.S. dollar was created and defined by the Coinage Act of 1792. It specified a "dollar" to be between 371 and 416 grains (27.0 g) of silver (depending on purity) and an 'eagle" to be between 247 and 270 grains (17 g) of gold (again depending on purity). It set the value of an eagle at 10 dollars, and the dollar at 1/10th eagle. It called for 90% silver alloy coins in denominations of 1, 1/2, 1/4, 1/10, and 1/20; it called for 90% gold alloy coins in denominations of 1, 1/2, 1/4, and 1/10.
The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy.
Euro (EUR) - The euro is the official currency of 16 of the 27 member states of the European Union (EU). The states, known collectively as the Eurozone, are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The currency is also used in a further five European countries, with and without formal agreements and is consequently used daily by some 327 million Europeans. Over 175 million people worldwide use currencies which are pegged to the euro, including more than 150 million people in Africa.
The euro is the second largest reserve currency and the second most traded currency in the world after the U.S. dollar. As of November 2008, with more than EUR 751 billion in circulation, the euro is the currency with the highest combined value of cash in circulation in the world, having surpassed the U.S. dollar. Based on IMF estimates of 2008 GDP and purchasing power parity among the various currencies, the Eurozone is the second largest economy in the world.The name euro was officially adopted on 16 December 1995. The euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1. Euro coins and banknotes entered circulation on 1 January 2002.
The euro was established by the provisions in the 1992 Maastricht Treaty. In order to participate in the currency, member states are meant to meet strict criteria such as a budget deficit of less than three per cent of their GDP, a debt ratio of less than sixty per cent of GDP, low inflation, and interest rates close to the EU average. In the Maastricht Treaty, the United Kingdom and Denmark were granted exemptions per their request from moving to the stage of monetary union which would result in the introduction of the euro.
Economists who helped create or contributed to the euro include Robert Mundell, Wim Duisenberg, Robert Tollison, Neil Dowling, Fred Arditti and Tommaso Padoa-Schioppa. (For macro-economic theory, see below.) The name euro was devised on 4 August 1995 by Germain Pirlot, a Belgian esperantist and ex-teacher of French and history, and officially adopted in Madrid on 16 December 1995.Due to differences in national conventions for rounding and significant digits, all conversion between the national currencies had to be carried out using the process of triangulation via the euro. The definitive values in euro of these subdivisions (which represent the exchange rates at which the currency entered the euro) are shown at right.
The rates were determined by the Council of the European Union, based on a recommendation from the European Commission based on the market rates on 31 December 1998. They were set so that one European Currency Unit (ECU) would equal one euro. The European Currency Unit was an accounting unit used by the EU, based on the currencies of the member states; it was not a currency in its own right. They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally the pound sterling) that day.
The procedure used to fix the irrevocable conversion rate between the drachma and the euro was different, since the euro by then was already two years old. While the conversion rates for the initial eleven currencies were determined only hours before the euro was introduced, the conversion rate for the Greek drachma was fixed several months beforehand.
The currency was introduced in non-physical form (travellers' cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the Eurozone) ceased to exist independently. Their exchange rates were locked at fixed rates against each other, effectively making them mere non-decimal subdivisions of the euro. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new euro notes and coins were introduced on 1 January 2002.
The changeover period during which the former currencies' notes and coins were exchanged for those of the euro lasted about two months, until 28 February 2002. The official date on which the national currencies ceased to be legal tender varied from member state to member state. The earliest date was in Germany where the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted for two months more. Even after the old currencies ceased to be legal tender, they continued to be accepted by national central banks for periods ranging from several years to forever (the latter in Austria, Germany, Ireland, and Spain). The earliest coins to become non-convertible were the Portuguese escudos, which ceased to have monetary value after 31 December 2002, although banknotes remain exchangeable until 2022.
Japanese Yen (JPY) - The yen (code: JPY) is the currency of Japan. It is the third most-traded currency in the foreign exchange market after United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling. As is common when counting in East Asia, large quantities of yen are often counted in multiples of 10,000 in the same way as values in Western countries are often quoted in thousands.
The issuance of the yen banknotes began in 1872, two years after the currency was introduced. Throughout its history, the denominations have ranged from 10 yen to 10000 yen. Before and during World War II, various bodies issued banknotes in yen, such as the Ministry of Finance and the Imperial Japanese National Bank. The Allied forces also issued some notes shortly after the war. Since then, the Bank of Japan has been the exclusive note issuing authority. The bank has issued five series after World War II. Series E, the current series, consists of 1000Y, 2000Y, 5000Y, and 10,000Y.
Beginning in December 1931, Japan gradually shifted from the gold standard system to the managed currency system. The relative value of the yen is determined in foreign exchange markets by the economic forces of supply and demand. The supply of the yen in the market is governed by the desire of yen holders to exchange their yen for other currencies to purchase goods, services, or assets. The demand for the yen is governed by the desire of foreigners to buy goods and services in Japan and by their interest in investing in Japan (buying yen-denominated real and financial assets).
Since the 1990s, the Bank of Japan, the country's central bank, has kept interest rates low in order to spur economic growth. Short-term lending rates have responded to this monetary relaxation and fell from 3.7% to 1.3% between 1993 and 2008. Low interest rates combined with a ready liquidity for the Yen prompted investors to borrow money in Japan and invest it in other countries (a practice known as carry trade). This has helped to keep the value of the Yen low compared to other currencies.
British Pound Sterling (GBP) - The pound sterling (ISO code: GBP), often simply called the pound, is the currency of the United Kingdom, its Crown dependencies (the Isle of Man and the Channel Islands) and the British Overseas Territories of South Georgia and the South Sandwich Islands and British Antarctic Territory. It is subdivided into 100 pence (singular: penny). The Gibraltar pound, Falkland Islands pound and Saint Helena pound are separate currencies, pegged to the pound sterling. Sterling is the third-largest reserve currency, after the US dollar and the euro. The pound sterling is the fourth-most-traded currency in the foreign exchange market after the US dollar, the euro, and the Japanese yen.
In 2006 the House of Commons Library published a document which included an index of the value of the pound for each year between 1750 and 2005, where the value in 1974 was indexed at 100. (This was an update of earlier documents published in 1998 and 2003.) Regarding the period 1750-1914 the document states: "Although there was considerable year on year fluctuation in price levels prior to 1914 (reflecting the quality of the harvest, wars, etc.) there was not the long-term steady increase in prices associated with the period since 1945". It goes on to say that "Since 1945 prices have risen in every year with an aggregate rise of over 27 times."
The value of the index in 1751 was 5.1, increasing to a peak of 16.3 in 1813 before declining very soon after the end of the Napoleonic Wars to around 10.0 and remaining in the range 8.5-10.0 at the end of the nineteenth century. The index was 9.8 in 1914 and peaked at 25.3 in 1920, before declining to 15.8 in 1933 and 1934-prices were only about three times as high as they had been 180 years earlier. Inflation had a dramatic effect during and after World War II-the index was 20.2 in 1940, 33.0 in 1950, 49.1 in 1960, 73.1 in 1970, 263.7 in 1980, 497.5 in 1990, 671.8 in 2000 and 757.3 in 2005.
Sterling is used as a reserve currency around the world and is presently ranked third in amount held as reserves. The percentage which pounds make up of total reserves has increased over recent years, due in part to the stability of the British economy and government, gradual increase in value against many currencies and relatively high interest rates compared to other major currencies such as the dollar, euro and yen. As from mid 2006 it is the third most widely held reserve currency, having seen a resurgence in popularity in recent years. Analysts say this resurgence is caused by carry-trade investors considering the pound as a stable high-yield proxy to the euro.
Swiss Franc (CHF) - The franc (German: Franken, French and Romansh: franc, Italian: franco; code: CHF) is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia. Although not formally legal tender in the German exclave Büsingen (the sole legal currency is the euro), it is widely used on a day-to-day basis. The Swiss National Bank issues banknotes and the federal Swissmint issues coins.
The Swiss franc is the only version of the franc still issued in Europe. The smaller denomination, a hundredth of a franc, is a Rappen (Rp.) in German, centime (c.) in French, centesimo (ct.) in Italian, and rap (rp.) in Romansh. The ISO code of the currency used by banks and financial institutions is CHF, although "Fr." is used by most businesses and advertisers; some use SFr.; the Latinate "CHF" denotes Confoederatio Helvetica franc, because Latin is used as the neutral language representing the country given its tetralingual populace.
The current, eighth series of banknotes was designed by Jorg Zintzmeyer around the theme of the arts and released starting in 1995. In addition to a new design, this series was different from the previous one on several counts. Probably the most important difference from a practical point of view was that the seldom-used 500 franc note was replaced by a new 200 franc note; this new note has indeed proved more successful than the old 500 franc note. The base colours of the new notes were kept similar to the old ones, except that the 20 franc note was changed from blue to red to prevent a frequent confusion with the 100 franc note, and that the 10 franc note was changed from red to yellow. The size of the notes was changed as well, with all notes from the 8th series having the same height (74 mm), while the widths were changed as well, still increasing with the value of the notes. The new series contains many more security features than the previous one; many (but not all) of them are now visibly displayed and have been widely advertised, in contrast with the previous series for which most of the features were kept secret.
All banknotes are quadrilingual, displaying all information in the four national languages. The banknotes depicting a Germanophone display German and Romansch on the same side as his picture, whereas banknotes depicting a Francophone or an Italophone display French and Italian on the same side as his picture. When the 5th series lost its validity at the end of April 2000, the banknotes that had not been exchanged represented a total value of 244.3 million Swiss francs; in accordance with Swiss law, this amount was transferred to the Swiss Fund for Emergency Losses in the case of non-insurable natural disasters. In February 2005, a competition was announced for the design of the 9th series, planned to be released around 2010 on the theme Switzerland open to the world. The results were announced in November 2005, but the selected design drew widespread criticisms from the population.
Australian Dollar (AUD) - The Australian dollar (sign: $; code: AUD) is the currency of the Commonwealth of Australia, including Christmas Island, Cocos (Keeling) Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu. Within Australia it is almost always abbreviated with the dollar sign ($), with A$ or AU$ sometimes used informally to distinguish it from other dollar-denominated currencies. It is subdivided into 100 cents.
The Australian dollar is currently the sixth-most-traded currency in the world foreign exchange markets, (behind the US dollar, the euro, the yen, the pound sterling, and the swiss franc), accounting for over 6% of worldwide foreign-exchange transactions. The Australian dollar is popular with currency traders due to high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of Australia's economy and political system, and the prevailing view that the Australian dollar offers diversification benefits in a portfolio containing the major world currencies, especially because of its greater exposure to Asian economies and the commodities cycle.
Australia maintained a peg to the British pound at par then at 0.8 GBP (16 shillings sterling). This reflected its historical ties as well as a view about the stability in value of the British pound. From 1946 to 1971, Australia maintained a peg to the US dollar under the Bretton Woods system, but it was effectively pegged to sterling until 1967.
With the breakdown of the Bretton Woods system in 1971, Australia converted the mostly fixed peg to a moving peg against the US dollar. In September 1974, Australia moved to a peg against a basket of currencies called the trade weighted index (TWI) in an effort to reduce fluctuations associated with its peg to the US dollar. The peg to the TWI was changed to a moving peg in November 1976, causing the actual value of the peg to be periodically adjusted.
On 9 December 1983, the Australian Labor government led by Prime Minister Bob Hawke and Treasurer Paul Keating floated the Australian dollar. From that point, movements in the Australian dollar reflected the credits and debits in the balance of payments. The terms of trade does not determine the value of the dollar but it is a major component of the balance of payments.
For decades, Australia's balance of trade has depended primarily upon commodity exports such as minerals and agricultural products. This means the relative value of the dollar varies significantly during the business cycle, rallying during global booms, and falling when mineral prices slumped or when domestic spending overshadowed its export earnings outlook. This high volatility has conributed to the AUD's status as one of the most traded currencies in the world.
Canadian Dollar (CAD) - The Canadian dollar (sign: $; code: CAD) is the currency of Canada. It is normally abbreviated with the dollar sign $, or C$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents. As of 2007, the Canadian dollar was the 7th most traded currency in the world.
A number of central banks (and commercial banks) keep Canadian dollars as a reserve currency. The Canadian dollar is considered to be a benchmark currency. In the economy of the Americas the Canadian dollar plays a similar role to that which the Australian Dollar (AUD) does in the Asia-Pacific region. The Canadian dollar (as a regional reserve currency for banking) has been an important part of the British, French and Dutch Caribbean state's economies and finance systems since the 1950s. The Canadian dollar is held by many central banks in Central America and South America as well. The holding of the Canadian dollar in Latin America is done so because of each nations nationally important issues of remittances and international trade.
By observing how the Canadian dollar behaves against the U.S. dollar, foreign exchange economists can indirectly observe internal behaviors and patterns in the US economy that could not be seen by direct observation. The Canadian dollar has only fully evolved into a global reserve currency since the 1970s when it was floated against all other world currencies. Some economists have attributed the rise of importance of the Canadian dollar to the long term effects of the Nixon Shock that effectively ended the Bretton Woods system of global finance.
United Arab Emirates Dirham (AED) - The United Arab Emirates dirham was introduced in 1973. It replaced the Qatar and Dubai riyal at par. The Qatar and Dubai riyal had circulated since 1966 in all of the emirates except Abu Dhabi, where the dirham replaced the Bahraini dinar at 1 dirham = 0.1 dinar. Before 1966, all the emirates that were to form the UAE used the Gulf rupee. As in Qatar, the emirates briefly adopted the Saudi riyal during the transition from the Gulf rupee to the Qatar and Dubai riyal.
On January 28, 1978, the dirham was officially pegged to the IMF's Special Drawing Rights (SDRs). In practice, it is pegged to the U.S. dollar for most of the time. Since November 1997, the dirham has been pegged to the 1 U.S. dollar = 3.6725 dirhams, which translates to approximately 1 dirham = 0.272294 dollar.
The name Dirham derives from the Greek word Drachmae, being one of the most widely used currencies of all time. Due to centuries old trade and usage of the currency, dirham survived through the Ottoman regime.
Netherlands Antillean Guilder (ANG) - In the 18th century, the Dutch guilder circulated in the Netherlands Antilles. This was supplemented in 1794 by an issue of coins specific for the Dutch holdings in the West Indies. At this time, the guilder was subdivided into 20 stuiver.
Between 1799 and 1828, the reaal circulated on the islands, with 1 reaal = 6 stuiver or 3.3 reaal = 1 guilder. The Dutch guilder was reintroduced in 1828, now subdivided into 100 cents. When currency began once more to be issued specifically for use in the Netherlands Antilles, it was issued in the name of Curacao, with the first banknotes and coins, denominated in the Dutch currency, introduced in 1892 and 1900, respectively. The name "Netherlands Antilles" (Nederlandse Antillen) was introduced in 1952.
In 1940, following the German occupation of the Netherlands, the link to the Dutch currency was broken, with a peg to the U.S. dollar of 1.88585 guilders = 1 dollar established. The peg was adjusted to 1.79 guilders = 1 dollar in 1971.
In 1986, Aruba gained a "status aparte" and thereby left the Netherlands Antilles. Shortly after that, Aruba began to issue its own currency, the Aruban florin, which replaced the Netherlands Antillean guilder at par.