Palestine, officially the State of Palestine as recognized by the United Nations and other entities, is a Western Asian sovereign state claiming the Gaza Strip and West Bank with Jerusalem as the capital. The initial currency of the British Mandate of Palestine was the Palestine pound from November 1, 1927, to May 14, 1948, and between May 15, 1948, and June 23, 1952, of the State of Israel.

The Palestinian pound was the currency used from 1920 to 1948 and had the same value as the Pound Sterling. The British Mandate came into power in 1948, and the Israeli Shekel replaced the Palestinian pound in the areas that were conquered by the Israeli Forces. The West Bank used the Jordanian Dinar, and Gaza Strip used the Egyptian pound. Following the Six-Day War in 1967 and up until now, the Israeli Shekel was continued to be used in the West Bank and Gaza Strip, especially in 1994, after signing the Paris Protocol, making the Palestinian dependent on the Israeli economy. The American Dollar and the Jordanian Dinar are also used in Palestine and the Shekel in some cases, like buying land, cars, houses, and any high-value properties.

The Palestinians are not allowed to introduce a separate Palestinian currency independently under the Protocol on Economic Relations. Instead, the main currency of the Palestinian territories is the Israeli New Shekel. The Jordanian Dinar is also used in the West Bank. The Shekel is used for most transactions, particularly retail, while the Dinar is used more for durable goods transactions and savings. The U.S. dollar is also sometimes used for purchasing foreign goods and for savings. The overwhelming majority of transactions use the dollar, supervised by the Palestinian Monetary Authority (that serves as Palestine's central bank), which only represents a part of the transactions administered by Palestinians or in Palestine. In the Gaza Strip, the Shekel is also the primary currency. Although, it is in short supply because of the blockade of the Gaza Strip by the PA, Egypt, and Israel. Because the Palestinian Monetary Authority does not circulate its own currency, it is, therefore, incapable of pursuing an effective and independent monetary policy. At the same time, the use of various currencies inflates the costs and produces inconvenience stemming from fluctuating exchange rates.

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