Technical advances brought about changes in military planning during the Second World War, but measuring the impact of new technologies and tactics was not the only preoccupation of the planners. Even monetary questions had to be confronted. During the war, armies had to be supplied with locally sourced materials wherever they were. This need, along with paying the soldiers, resulted in large international transfers of money. Yet, it wasn’t always obvious what the optimal means of payment was. Instead of relying on whatever local supplies of currency were available and rather than bring the currency from back home abroad, the Allies’ during the Second World War introduced ‘Allied military currency’ for use on campaigns abroad.

Allied Military Lira

           In March 1943, the Bureau of Engraving and Printing in Washington D.C. was authorized to begin printing a special new currency. This was not a new series of U.S. dollars but special Italian lire; a ‘military currency’ to be used in the invasion of Italy which began in July that year with a landing of troops in Sicily. To meet large demand from the Treasury Department, the Bureau employed the Boston-based printing firm, Forbes Lithographic Manufacturing Company to produce military currency destined for Europe. In total, almost one billion military lira notes were delivered.

           A recurring theme in the development of military currencies everywhere is the problem of setting a proper valuation. After a country’s occupation in wartime, it is frequently politically and economically difficult to set a fixed exchange rate. In Italy after its invasion by the Allies, the value of the lira against sterling or the dollar was fluctuating wildly by the month. Nonetheless, the British and American authorities settled on a fixed exchange rate of 400 lire to the pound, or in dollar terms, 100 lire to the dollar.

           The new ‘Allied military lira’ was briefly recognized as legal tender by the immediate post-war Italian government. This was despite the currency being accused by cynics of having undervalued the Italian lira to maximize the purchasing power of the victors in Italy. In essence, they argued that the introduction of this special money was a form of Allied exploitation not unlike that of Germany in its conquered territories. However, the lira actually traded even lower against the dollar on Rome’s black market than the 100-to-1 official rate. This created problems for the American military which paid its soldiers in Italy not in dollars but in lire.

           Essentially, the issue was one of currency speculation. The military lira was convertible into dollars by American soldiers in Italy, but not the Italian public, at the official rate. This was to allow soldiers to save their pay, or send it back home, in dollars while giving them local money to spend in Italy.

           However, because the official rate had actually come to overvalue the lira, it encouraged soldiers and airmen in Italy to acquire lira at lower black-market rates in Rome and elsewhere and trade them into dollars at certain army finance offices. Soldiers were not capped at how much lire they could convert, even if they were seeking to convert more lire than they were paid. The speculation caused the War Department to pay out more dollars in soldier pay than was appropriated.


           Allied military currency was conceived in mid-1942. The approach offered advantages relative to the alternatives of relying on local banknotes and introducing currency from the invading country. Unlike the first alternative, military banknotes provided a means of payment if local supplies of currency were scarce, either from being seized or destroyed by the withdrawing army. Compared to using the ordinary currency of the invading country, special military currency avoided inflation caused by military expenditures abroad spilling back into the homeland. The unique currency could also be easily cancelled if an Allied invasion was repelled and the military notes fell into enemy hands.

           The governments in exile of Western European countries being liberated also preferred to avoid introducing dollars and pounds sterling into their economies. They sought to avoid the ‘dollarization’ of their economies and to this end the U.S. War Department paid most American soldiers in Europe in local currency, or in Allied military currency denominated in local units of account, rather than in dollars. Though these governments made their preferences clear, it was ultimately officials from various American and British government departments that directed the development of Allied military currency.

Francs, Marks, and Yen

           Military currency was used by the Allies in the Second World War in countries other than Italy. In France and in French North Africa, military currencies were issued by the British and Americans. In North Africa, the American notes were called ‘Yellow Seal Dollars’ since the Treasury Department’s seal on the otherwise ordinary dollar notes was printed in yellow rather than in blue. These notes were also used in Italy as the Allied military lira notes were still being prepared.

           The Allied currency used in North Africa was fixed at an exchange rate of 300 francs per pound sterling which enhanced the Allies’ purchasing power compared to a pre-war exchange rate of 176 francs to the pound. The rate was later reduced to 200 francs to the pound. The yellow seal dollars and the special wartime sterling notes issued by the British Military Authority were replaced in France after the D-Day landings at Normandy by an Allied military franc in the style of the military lira.

           The military francs were controversial because of the ambiguous position of France among the Allies. General de Gaulle and his comité français de libération nationale opposed the currency and they proved easy to counterfeit no less. Indeed, both German authorities evacuating France and the Free France government alike opposed it. The Germans did so by encouraging counterfeits and issuing propaganda against it and the new French provisional government by not recognizing it, even coming close to refusing it for payment of taxes. Like most other Allied military currency, the military franc notes did not last long, replaced by Banque de France notes after 1947.

           Similar special banknotes were issued to supplement local currency supplies in other liberated and defeated countries in Europe. Allied military marks were used in occupied Germany from 1944 to 1948 and military schillings in Austria from 1945 to 1947. After Japan’s surrender in the summer of 1945, Allied military yen were used in Japan. Unlike those in Europe, Allied military currency in Asia was printed in San Francisco by the Stecher-Traung Lithographic Corporation and the State of California Bureau of Printing. The military yen specifically was comprised of two types, one used briefly in Korea in 1945 and 1946, and one in Japan all the way to 1958, the longest employed military currency of the Second World War.

Other Wartime Currencies

           The war provides other examples of military currencies, including those used by the Axis and those used by Allied governments within their own territories. The Germans issued special notes called reichskreditkassenscheine in occupied Poland, Belgium, and elsewhere. These predated the Allies’ experiment with special military notes and so provided an example.

           Like the Allied military currency, the German war money was intended to reduce inflation, which the Reichsbank feared could spill back into Germany if ordinary marks were spent in neighboring countries. A special currency for use exclusively in the occupied territories would solve this problem. In France, these reichskreditkassenscheine were used right until the German retreat in 1944.

           The Japanese also employed their own special currencies in conquered foreign territory. These included so-called ‘Japanese pesos’ in the Philippines and ‘Japanese rupees’ in Burma. There were also ‘Japanese shillings’ in New Guinea and the Solomon Islands and ‘Japanese dollars’ in Malaya. In each case, the notes took the name of the existing local currency but adopted a distinct appearance.

           Of course, the Philippines were formerly American territory and the invasion of the islands prompted fears in Hawaii. The Japanese bombing of Pearl Harbor occurred just before the invasion of the Philippines began. Here too there was a financial response to the threat.

           In August 1942, a special ‘Hawaii’ series of dollar banknotes were printed. They were overprinted with “Hawaii” on both sides and the Treasury Department seal and serial numbers were printed in brown. The intention was to make them distinct enough to be easily cancelled in the event of an invasion of Hawaii. The notes, which went on to be used elsewhere in the Pacific, continued to be issued into 1944. A similar concept was also employed in the Philippines with banknotes overprinted with the word “Victory” used after the reconquest of the Philippines began in 1944.


           The grappling with questions of currency that accompanied military operations during the Second World War involved the most powerful. Among the Americans, even General Eisenhower and President Roosevelt weighed in on the issue. The scale of the problem set reveals how monetary considerations formed a critical part of military planning. Consideration was specifically given to the seemingly mundane question of banknote design. Brought on by necessity, novel yet consequential experiments in currency were undertaken on the ever-shifting front lines of the European and Pacific theaters of the war.

More from the Tontine Coffee-House

           Discover more about ‘Japanese pesos’ and other Japanese military currencies. Also read about how the Second World War affected the market for art as an investment.

Further Reading

1.      Mouré, Kenneth. “Spearhead Currency: Monetary Sovereignty and the Liberation of France.” The International History Review, vol. 42, no. 2, 10 Feb. 2019, pp. 278–297.

2.      Rundell, Walter. “Currency Control by the United States Army in World War II: Foundation for Failure.” Pacific Historical Review, vol. 30, no. 4, Nov. 1961, pp. 381–399.

3.      Southard, Frank A. “Some European Currency and Exchange Experiences: 1943 -1946.” Essays in International Finance, 1946.

4.      Spahr, Walter E. Allied Military Currency: Some Queries and Observations. Economists National Committee on Monetary Policy, 1943.

5.      Bureau of Engraving and Printing: Historical Resource Center. Special and Allied Military Currency, 2013.

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