Reports Of The Dollar's Death Are Premature

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Surprisingly for a small economy, the Australian dollar is the seventh most traded currency in the world, just behind the Swiss franc. This may be due to speculators viewing it as a“commodity currency”, or a proxy for less accessible Asian currencies. It is one side of 6% of trades.

It is much more heavily traded than the currencies of much larger economies such as India, Russia, Indonesia, Brazil and South Korea. As the Reserve Bank Deputy Governor Andrew Hauser recently put it , the Australian dollar“has long punched above its weight in global markets”.

The Bank for International Settlements also compiles information about where the transactions occurred. This shows three-quarters of currency trading is concentrated in just four places: London, New York, Singapore and Hong Kong.

Notwithstanding much discussion about challenges to the US dollar's position, the trading data show little change. The US dollar was involved in 90% of foreign exchange transactions in the first survey in 1989 and 89% in 2025.

However, where the decline is evident is in the holdings of currency reserves by central banks. US dollar assets now make up 58% of reserves, according to the International Monetary Fund . This has dropped from 65% in 2016.

The US dollar and euro are each used for invoicing about 40% of global trade, according to a European Central Bank study . While use of the renminbi has grown, it is still only used for around 2%.

This special status of the US dollar has been termed an“exorbitant privilege”, originally by the then-French finance minister (and later president), Valéry Giscard d'Estaing. It allows the US to borrow at lower interest rates.

The status of the US dollar has been increasingly resented by the emerging economies known as the BRICS nations. Originally Brazil, Russia, India, China and South Africa (most of the largest economies outside the G7 ), the BRICS have now been joined by some other non-Western countries.

They have expressed a desire to trade more using their own currencies.

A BRICS currency is still a long way off. Image: X Screengrab

But history tells us that dominant currencies change only slowly. The British pound still maintained a in the 1950s despite the UK's share of the global economy having been overtaken by Germany and the United States early in the 20th century.

This is partly a“network effect.” In the same way that Uber, Facebook and Spotify have dominated their respective markets, once a currency is dominant, the rest of the world finds it more convenient to use it.