The US dollar is the standard currency in use in Panama.
The Balboa coinage
The official currency is the Balboa. However, in 1941 Panama stopped printing the Balboa to use the US dollar. Panama does still mint coins in the denominations of 1, 5, 10, 25, 50 and 100 which are the same metal, size and shape of the equivalent US cents. Since the Balboa has had a fixed exchange rate of 1.1 with the US dollar since 1903, these Balboa coins are used interchangeably with the US coins, so you may end up with Balboa coins during your stay in Panama.
Note that since the coins are identical in shape and size to US coins, they will work in US vending machines even though the images on the coins are Panamanian.