Dollar still dominates for global currency payments

Renminbi recognised as collateral for industrial metal trading

The US dollar increased its dominant position in global trade payments between the fourth quarter of 2012 and 2014, according to latest research.

The ‘Worldwide Currency Usage and Trends’ paper, produced by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), with the support of the City of London Corporation and Paris EUROPLACE, analyses patterns of trade and currency payments between the Europe, Americas and Asia-Pacific regions over the two-year period.

There has been an overall growth in the value of global trade payments, with the biggest flow of payments found between Europe and the Americas – up by 32% from Q4 2012 to Q4 2014.

The US dollar (USD) increased its dominance, accounting for 51.9% of currency usage overall by value, up from 47.6% in 2012, and with a reach of 79.5% for inter-regional flows (excluding intra-regional and domestic flows). The euro (EUR) ranks second by value globally, at 30.5% (down from 33% in 2012) and the British pound (GBP) is third with 5.4% (from 5.9% in 2012).

The paper also highlights the increased use of the renminbi (RMB) for global payments as China continues to influence the global economy and the RMB continue to expand. Flows of the currency between Asia-Pacific and both the UK and wider Europe grow strongly over the two years to Q4 2014. For RMB payments from the UK to Asia-Pacific, the proportion of payments rose from 0.7% to 4.5% by value, and up from 0.4% to 3.6% in the reverse direction, making it the sixth most active global currency for these regional flows.

The report also shows UK banks continue to be the major trading partner in more than half of all European payment flows overall, as reflected in the intermediary role the UK plays for some currencies. For example, the country acts as an intermediary for 68% of the euro payments by volume that the UK receives from the Americas. The UK also plays a significant intermediary role for RMB payments (51.3% of volume) reaching the UK from the Americas.

“The Chinese yuan has shown notable growth for payments, particularly between the UK and Asia-Pacific region and this trend will continue to grow as the UK consolidates its position as a global leader in the offshore RMB market,” said Mark Boleat, policy chairman at the City of London Corporation. “The UK plays a strong role for intermediary payments and as a global trade partner with Europe – highlighting our position as the gateway for trade with the continent.”

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