What is the Currency of Palau?

By Victor Kiprop on August 1 2017 in Economics

US dollar coins and banknotes.

What is the Currency of Palau?

The Republic of Palau is located in the western Pacific Ocean. It consists of 340 islands that have a combined surface area of 180 square miles. English and Palauan are the official languages. Palau has a close relationship with the United States and tourists from the US flock to the islands during the summer. Key industries in the economy are tourism, fishing, and subsistence farming. Until 1947, Palau was a Trust Territory of the Pacific Islands, and in 1979 it voted against joining Micronesia. In 1994, Palau became a sovereign state as part of the Compact of Free Association with the US. It does not have its own currency and uses the US dollar as its official currency. Using the US dollar as its currency reduces the economic burden of maintaining a central bank, but every decision or shift in US currency effects Palau. Despite the fact that the state has a GDP of $287.4 million, the per capita income is $13,498.66.

The United States Dollar

The United States Dollar has the code USD and is abbreviated as US$. The US dollar is also subdivided in 100 cents (¢). It is the official currency of the US and its territories. It is commonly used in international transactions and is the standard reserve currency for several countries. It acts as a de facto currency for several countries, alongside the euro. If a country is unable to produce its own currency or if its currency lacks value, the US dollar is often used as currency.

US Coins

US coins are produced by the United States Mint, which operates four mints, the largest of which is located in Philadelphia. Today the coins in circulation are the 1¢,5¢,10¢, 25¢, 50¢, and the $1. Since coins were first minted in 1792, they have undergone several changes in their shape, design, weight, material, and color. The latest coins to be produced were the Presidential One Dollar Coins that bore the images of past American presidents. An error in the minting of the coins, increasing stockpiles, and budget constraints led to the suspension of the coin in 2011.

US Banknotes

The US banknotes in circulation are the $1, $2, $5, $10, $20, $50, and $100. The first Federal Reserve Banknotes were issued in 1914 and were different from the initial notes issued. Initially, the smallest denomination was the $5, while the largest was the $10,000. In 1945, the $500, $1,000, $5,000, and $10,000 banknotes were suspended from production and later removed from circulation in 1969, making the $100 the largest denomination of the US currency in circulation. The $1 note in circulation today was introduced in 1963, and the $2 note was introduced in 1971 but discontinued a decade later. The $2 was unpopular among the public, and although the printing of the note is still ongoing, it is only done for curiosity purposes. All other denominations of notes, except $1 and $2, were redesigned to portray larger images. In 2004, the denominations underwent further redesign in their color to distinguish them from each other.

More in Economics