The afghani is the official currency of Afghanistan. It is a decimal currency divisible into 100 pul. However, pul are not used in cash transactions as no forms of currency exist in denominations of less than 1 Af. The original afghani was introduced as the official Afghan currency in 1925 as a replacement for the Afghan rupee. In addition to the lower designation, the pul, a higher monetary designation equal to 20 afghani, the amani, also existed. At its introduction, the value of the afghani was set to 1 afghani: 1.1 rupees. This was based on the relative silver content of the afghani and rupee coins. After the initial value was set, the value of the afghani floated on the market for all but a brief period during World War II. However, a parallel fixed exchange rate that was more preferential than the international rate was put into place by the Afghan Central Bank for certain internal transactions on several occasions. This fixed rate came into use seasonally to avoid fluctuations that occurred each year. Another notable dual exchange rate system was created in 1935 by Bank-e Milli. After the Afghanistan Bank became the Central Bank of Afghanistan, this practice continued, allowing the preferential rate to be internally maintained. In 2003, the dual exchange rate system was dropped in favour of completely floating the currency.
Prior to 2002, very little standardization or oversight was provided for the printing of banknotes in Afghanistan. Banknotes were printed by political parties, warlords and foreign countries. Afghani banknotes were also easily forged. Because of this fact, when the Taliban came into power in 1996, they made all banknotes valueless. The Northern Alliance attempted to wrest financial control of the country from the Taliban by issuing their own banknotes and selling them in markets at half-value.
In 2003, the Afghan currency system was overhauled and a new afghani was introduced. The new afghani has no decimalized subdivision. Two initial exchange rates had to be set up because both the Taliban-issued currency and the Northern Alliance-issued currency was concurrently in use but had different values. Many Afghanis did not trust the new currency system and the use of U.S. dollars was widespread. After an initial depreciation of the afghani, the value steadily rose after 2004 as the Afghan people began to trust the new currency. The new afghani was first introduced with a series of banknotes, but in 2005, coins were minted in denominations of 1, 2 and 5 afghani.