U.S. District Judge Frank C. Damrell Jr. said the minted words amounted to a secular national slogan that did not trample on Michael Newdow's avowed religious views.
Newdow, a Sacramento doctor and lawyer, also is engaged in an ongoing effort to have the Pledge of Allegiance banned from public schools because it contains the words "under God."
Two years ago, the pledge fight reached the U.S. Supreme Court, which said Newdow lacked standing to bring the case because he didn't have custody of the daughter on whose behalf he brought the case.
But a Sacramento federal judge sided with Newdow in September after he filed an identical lawsuit on behalf of parents with children in three Sacramento-area school districts. The case is pending before the 9th U.S. Circuit Court of Appeals.
Newdow's "In God We Trust" lawsuit targeted Congress and several federal officials, claiming that by making money with the phrase on it the government was establishing a religion in violation of the First Amendment clause requiring separation of church and state.
The phrase "excludes people who don't believe in God," he claimed.
Damrell disagreed, citing a 9th Circuit decision from 1970 that concluded the four words were a national motto that had "nothing whatsoever to do with the establishment of religion."
Newdow said Monday he would appeal.
Congress first authorized a reference to God on a two-cent piece in 1864. In 1955, the year after lawmakers had the words "under God" put into the Pledge of Allegiance, Congress passed a law requiring all U.S. currency to carry the motto "In God We Trust."
Newdow filed the lawsuit five days after the U.S. Supreme Court rejected, without comment, a challenge to an inscription of "In God We Trust" on a North Carolina county government building.