- The U.S. dollar remains dominant in global finance despite a decline in America’s share of the world economy.
- Gold has seen rising demand, with central banks increasing their reserves and prices moving toward new highs.
- About 20% of global oil trade now occurs outside the dollar system, mainly in Chinese yuan.
- Foreign treasury holdings of U.S. debt have fallen, but this shift has been gradual rather than abrupt.
- The lack of equally liquid currency alternatives keeps the U.S. dollar at the center of global transactions and reserves.
The position of the U.S. dollar in international finance shows little sign of rapid change, as the currency continues to hold a majority share in cross-border transactions. At present, the dollar is used in about 69% of global trades, even as the U.S. economy now represents only 26% of world gross domestic product, a notable decrease from the 1960s.
According to data referenced by JP Morgan’s Louis Oganes, the dollar’s portion of foreign currency lending fell only slightly, dropping from 72% in 2016 to 69% now. The share of global exports from the U.S. has also seen a decrease—falling to 10% today from 20% in the 1950s—while China’s share increased to 12%. The international use of the Chinese yuan remains low at just 3% of global transactions.
“You would expect given the lower weight of the U.S. in global trade in global GDP that the dollar should have lost already more than the share that it has,” said Oganes. He noted that the U.S. Treasury market, known for its deep liquidity, remains unmatched by other nations. Even after the U.S. lost its top credit rating, investor demand for Treasury securities stayed steady.
Structural changes are emerging most visibly in global commodity trading. Roughly 20% of oil sales are now conducted outside the dollar system, primarily in yuan. This was driven in part by sanctions against countries like Russia and Iran, which led them to accept other currencies for exports.
Central bank reserves have also shifted. Dollar reserves dropped from 85% in the 1970s to about 60% today, with gold gaining as a favored alternative. Emerging market central banks increased their gold reserves from 4% to 9% in the past decade, while developed nations now hold about 20% of their reserves in gold. The price of gold has risen from $1,000 per ounce to nearly $3,000 in just four years, with JP Morgan forecasting a potential jump to $4,000 by early 2026.
Foreign-held U.S. Treasury bonds now account for about 30%, down from 50% in 2008-09. This decrease is attributed to a passive rotation, as maturing bonds allow for gradual reallocation rather than sudden selling. While global reserve managers diversify, a lack of alternatives preserves the dollar’s significant role in global finance. For more information on gold and currency trends, see the related content on BRICS-gold-reserves-how-much-they-have-de-dollarization-impact/”>BRICS Gold Reserves: How Much They Have & De-Dollarization Impact.
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