Joanna Jolly, Dili – The head of the UN Central Payments Office, which manages the territory's tiny and shattered economy, told reporters that the world body was taking legal steps and launching an educational campaign urging East Timorese to embrace US greenbacks and coins as the sole legal tender.

Fernando DePeralto said the program is meant to "address the implementation of the dollarization more fully" and bring more stability to the economy, though he said it could cause some inflation.

The United Nations has governed the territory since a 1999 vote for independence from Indonesia, which occupied East Timor in 1975. More than 80 percent of the region was destroyed and hundreds of people were killed by retreating Indonesian troops and allied militias.

The territory will remain under UN administration until elections for an 88-member constituent assembly in August. The assembly is expected to become East Timor's first elected parliament when independence is made formal next year.

The UN administration introduced official use of the US dollar in January 2000. A dozen countries and territories around the world already use the US dollar, including El Salvador, Ecuador, Guatemala and Panama.

However, despite the UN decision, the Indonesian rupiah and Australian dollar have remained in widespread circulation in East Timor.

Although the United Nations pays its staff in US dollars, many Australian-run businesses prefer to price goods in the Australian currency. And many East Timorese continue to use rupiah to buy cheap Indonesian goods.

The UN also will ban unlicensed money changers, who illegally bring in rupiah to exchange for US dollars, then smuggle them back into Indonesia for a profit.

The push to enforce the use of US dollars is likely to anger the some 400 moneychangers who work on the streets of Dili. "Young people change money because they don't have real jobs. If the UN wants us to stop, they have to give us a salary," said John da Silva, a currency dealer.