While the Canadian currency is the Canadian dollar (CAD), some businesses near the falls accept US dollars, especially in the bustling tourist areas including duty-free stores. However, note that the exchange rate offered may not be favourable. It's advisable to exchange your USD to CAD for better deals and ease of use elsewhere across Canada.
On the American side: Of course, US dollars are accepted on the American side of Niagara Falls, which lies within New York State and is part of the United States. The official currency of this area is the USD, so you can freely use American money without any exchange concerns.