The U.S. dollar's dominance in global payments has strengthened to a new high, according to the latest transaction data from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). The dollar's share of SWIFT FX transactions rose to 46% in July, up from about one-third a decade ago. Meanwhile, the Chinese yuan's involvement in SWIFT instructions reached over 3% for only the second time on record, signaling a gradual but persistent push for de-dollarization.
Dollar Share Hits Record High, Euro Declines
According to Bloomberg, SWIFT processes approximately 200 million FX confirmations annually. The 46% share is the highest ever recorded for the greenback. The increase has largely come at the expense of the euro, which peaked at a 46% share in 2012 and has since fallen to just under a quarter — its lowest level on record. The European common currency has been weakened by economic stagnation and loose monetary policy in the eurozone.
Chinese Yuan Makes Steady Progress
SWIFT data also reveals that more than 3% of instructions sent via the system involved the Chinese yuan in July, compared to just 0.03% in 2010. A growing number of countries are adopting the yuan or other national currencies for international trade, reducing reliance on the dollar. The BRICS bloc — Brazil, Russia, India, China and South Africa — concluded its 15th annual summit this week, with leaders agreeing to encourage the use of national currencies in cross-border transactions.
De-Dollarization Movement Gains Traction But Dollar Still Dominant
While the de-dollarization movement is gaining momentum among emerging economies, most economists caution that the dollar's supremacy is not under imminent threat. Nobel laureate Paul Krugman has warned the dollar's dominance will not last forever, but he and many others do not view the Chinese yuan as a serious challenger. The dollar still accounts for about 59% of global foreign exchange reserves and benefits from the depth of U.S. financial markets, the rule of law and geopolitical networks.
In summary, the latest SWIFT data highlights both the unprecedented strength of the U.S. dollar in global payments and the incremental rise of the Chinese yuan. The evolution toward a multi-currency international settlement system will likely be a key theme in the future of global finance.