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A currency is a unit of exchange, facilitating the transfer of goods and services. It is a form of money, where money is defined as a medium of exchange (rather than a store of value). more...
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A currency zone is a country or region in which a specific currency is the dominant medium of exchange. To facilitate trade between currency zones, there are exchange rates i.e. prices at which currencies (and the goods and services of individual currency zones) can be exchanged against each other. Currencies can be classified as either floating currencies or fixed currencies based on their exchange rate regime. In common usage, currency sometimes refers to only paper money, as in "coins and currency", but this is misleading. Coins and paper money are both forms of currency.
In most cases, each country has monopoly control over the supply and production of its own currency. Member countries of the European Monetary Union are a notable exception to this rule, as they have ceded control of monetary policy to the European Central Bank.
In cases where a country does have control of its own currency, that control is exercised either by a central bank or by a Ministry of Finance. In either case, the institution that has control of monetary policy is referred to as the monetary authority. Monetary authorities have varying degrees of autonomy from the governments that create them. In the United States, the Federal Reserve operates without direct interference from the legislature or executive. It is important to note that a monetary authority is created and supported by its sponsoring government, so independence can be reduced or revoked by the legislative or executive authority that creates it. However, in practical terms, the revocation of authority is not likely since those who have the power to do so are generally beholden to the Fed for their positions. In almost all Western countries, the monetary authority is largely independent from the government.
Several countries can use the same name, each for their own currency (e.g. Canadian dollars and US dollars), several countries can use the same currency (e.g. the euro), or a country can declare the currency of another country to be legal tender. For example, Panama and El Salvador have declared US currency to be legal tender, and from 1791-1857, Spanish silver coins were legal tender in the United States. At various times countries have either restamped foreign coins, or used currency board issuing one note of currency for each note of a foreign government held, as Ecuador currently does.
Each currency typically has one fractional currency, often valued at 1โ100 of the main currency: 100 cents = 1 dollar, 100 centimes = 1 franc, 100 pence = 1 pound. Units of 1โ10 or 1โ1000 are also common, but some currencies do not have any smaller units. Mauritania and Madagascar are the only remaining countries that do not use the decimal system; instead, the Mauritanian ouguiya is divided into 5 khoum, while the Malagasy ariary is divided into 5 iraimbilanja. However, due to inflation, both fractional units have in practice fallen into disuse.
Read more at Wikipedia.org
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