Most restaurants, markets, and other service providers readily accept US dollars as long as they don’t have any rips. They will generally give you change in local currency. The local currency is the Sol. It is handy to use local currency in markets as you will have smaller denominations to bargain/ tip with and don’t need to worry about your currency looking pristine (ripped Soles are common and readily accepted). You can exchange money in most towns, such as Pisac. Cusco will give you a slightly higher rate. The exchange rate fluctuates daily.