The island is run by its own government, with little involvement with the USA aside from occasional business with a private corporation which is based in Nevada. Would I need to explain why USD is the currency used on the island? Would I need to make this make sense to the reader? The story takes place in the 21st century btw. The island, and the supernatural world, are all secret and hidden from the general public.
I don't think you need much...perhaps have somebody raise an eyebrow when his waiter gives him a bill in USD, and the person he's meeting laughs and says "We've always found it convenient." After all, a small country may want the stability that a major currency would provide, rather than the independence from outside influences that having its own currency would provide...and which didn't help Greece! Unless there's some plot significance in USD.
You need to know why a magical world would use USD and it should be briefly hinted at in the book, but otherwise I'm not sure it matters. There definitely needs to be a reason though
There are quite a few real countries that use the US dollar as their currency, so it doesn't seem farfetched to believe that a magical one would, too.
Maybe the island was once part of the US but after some kind of uprising, was declared independent. Maybe it start as this little cluster of islands: but was unified by your magical folks, built up enough to self sustain and then they emancipated themselves by threatening to reveal their powers to the general population? Or by getting close enough to threaten the President? Or, maybe your Island is just 'autonomous'. The US allow them to monitor themselves but retain technical ownership/responsibility for the territory? Edit: That all seems a little convoluted now I think about it, but hey! Would explain the currency
Do they have to use the USD (rather than shiny gold coins or acorns or whatever else)? As in is it important to the plot in any way? Or could their currency go unspecified with no repercussions? If you do want then to definitely use the USD you could always have the main character or whoever be confused at it but never explain it, if there's a certain amount of weirdness and mystery about the island, or just handwave it like Shadowfax suggests. I'm not sure if many people are going to be actively wondering what currency is used unless it actually comes up, but if it does you definitely want to acknowledge it in some way, I'd say - whether you use it to contribute to general eeriness or just go "hahah, yeah, this is easier than maintaining our own currency with exchange rates and whatnot" to make your magic islanders seems more normal and down to Earth. Either way I'd think it's a good opportunity to worldbuild a little bit!
They could have their own dollars, just as there are other countries besides the US which have them. Australia and Canada each have their own version of the dollar, and I know there are others.
There are several places outside the U.S. where the U.S. dollar are the official currency. Here's a map of current countries that refer to their own currency with the word dollar. When I once went on vacation to Costa Rica, my cabdriver overhead my then-boyfriend and I discussing how much money we had exchanged into Costa Rican colones, and he quickly piped up in very good English that if we wanted to hold on to our colones, he was more than happy to take USD. I see no reason why your magical island could not count on USD as its currency.
Hello Wreybies, so how come your map says 'dollars' for Spain? Are you suggesting the Spanish use the word 'dollar' as slang? The Spanish trade in the marvellous 'Euro' currency, I'm sure you know, though 'Fistful of Dollars' was filmed in...somewhere Spain. Probably a source of great confusion...spaghetti westerns.
Well, that's rather dismissive. I'll just pack dollars for Spain. I might be punched in a taxi, waving my 'dollars.'
Wikipedia has a fundamental flaw, it not 100% accurate. just as pointed out the false information can be a problem.
Red on the map means "countries that formerly used a dollar currency". So apparently at some point Spain used the word "dollar"? - Yup, according to various google sources. (dark green on the map means currently use a dollar currency, bright green means currently use the US dollar as currency). We probably could have figured out that the different colours meant different things, couldn't we?
They could still use the word "dollar" and perhaps have the same equivalent. Or just use "cash" or "money" or whatever. i.e. "I handed the taxi driver some money" vs. "I handed the taxi driver thirty dollars"
Is there any particular reason it needs to trade in US Dollars, or is that just for convenience? For the record, there is a difference between "official" currency and "de facto" currency - particularly in small countries and developing nations, where currency might not be as stable as it could be (remember the point a few years ago when Zimbabwe had hyperinflation, meaning that between you entering a shop and buying a loaf of bread, the price had doubled?). In those situations, simply using foreign currencies which are less likely to completely demolish your business and savings' value is commonplace. (Edit: Just noticed Zimbabwe is actually listed in the above map as "trading in US dollars" - this would be why.) I remember when I was a kid and we would go somewhere like Tunisia or Turkey, and many of the local would prefer that we paid for their goods in Sterling, and would even give us a discount for doing so, because they knew that it was less likely to suddenly devalue compared to their own local currency. If the primary industry on the island is a US-based company, perhaps with many of its residents also being US citizens employed by that company, then it's perfectly feasible and not even slightly confusing that they might trade in two currencies simultaneously (in the same way that shops in British airports often accept payment in Euros), and even exclusively in US Dollars in some areas (as I believe was the case in some areas of Afghanistan near the military bases while my brother was serving over there).
where did you find Spain used dollar? I found that the silver Escudo coins where called dollars, but Spain had the Real, then The Silver Escudo (aka dollar) then the Pesetas till the euro. http://www.donquijote.org/culture/spain/history/spanish-currency-history "The Spanish dollar was used in American and Asia and Spanish coinage became popular during this period in international trade and commerce." I am not a historian but would be surprised if the Spanish used the word dollar to describe their currency. here Wikipedia says nothing about Spanish dollar http://en.wikipedia.org/wiki/Peseta
I want to use the USD on the island mainly because most of the main characters in the story are from the US.
Oh btw, the story makes several references to an American corporation which does a lot of business on the island. Would this be an acceptable explanation?