There is no way around the US dollar

The Bank for International Settlements has published its triennial statistics on foreign exchange turnover, considered the ultimate in global foreign exchange trading. The most important finding for us is the predominance of the US dollar. Despite doubts about the reliability of US policy and the frequently assumed global desire for an alternative means of payment, the US currency can even slightly expand its leading position in the foreign exchange market.

Other key statistical findings are as follows:

„Overall sales are on the rise again: Daily foreign exchange turnover in April 2019 was 6.6 trillion. US dollar (2016: 5.1 trillion). The trend of declining volumes observed between 2013 and 2016 has thus been broken.

„US dollar remains the most liquid currency: 88.3% of all foreign exchange transactions are denominated in US dollars (2016: 87.6%). The euro can also maintain its second place with 32.3% (31.4% in 2016); however, it cannot be denied that its role has declined structurally compared to the previous decade (2010: 39%). By far the biggest setback of all currencies was in the yen, which now accounts for only 16.8% (2016: 21.6%). (Since two currencies are always involved in one transaction, the global sum is 200%.)

„Expansion of the EM segment continues: One of the big trends of the last BIS surveys was the growing turnover in EM currencies. With a current share of 24.3% of the total market, the role of the entire EM segment has doubled since 2007. The second largest loss of reputation after the yen was suffered by the Turkish lira. Its share of the overall market fell from 1.44% to 1.08%, and (together with the Danish krone) it is one of the only two currencies whose absolute sales have declined since 2016, which in turn tends to increase the risk of flash crashes.

„Slower growth in the yuan: emerging Asian currencies have consistently appreciated. It may come as a surprise to learn that the Chinese yuan, which at first glance appears to be slowing, is no longer able to improve its ranking, but remains in eighth place. This, however, hides an increase in the relative share by 0.3 percentage points to 4.3% of the total market and in the absolute CNY trading volume by 41% (from USD 202 billion in 2016 to USD 284 billion in 2019). In addition, the Hong Kong dollar (as a surrogate for the yuan) has made the biggest leap of all; the 165% increase in absolute HKD sales and the increase in the share of the total market from 1.7% to 3.5% are probably attributable to the overarching „China story“.

 

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