The latest global currency payment rankings have arrived.
Recently, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) released the global payment currency rankings for October 2023, based on the amount of money transferred.
Looking at the specifics, the US dollar continues to show strong performance, with its first place position unshakable, and the euro follows closely behind, firmly holding the "eternal second" spot.
In addition, the British pound ranks third, the Japanese yen's share continues to decline, ranking fourth, and the renminbi's payment share has ended a nine-month increase. Although it maintains its position as the fifth most active currency globally, its share has unexpectedly fallen.
What's going on? Wasn't there a wave of "de-dollarization"? Why is the dollar still so strong? Why has the renminbi fallen?
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The dollar's dominant position is hard to shake
In October of this year, the US dollar's payment share reached as high as 47.25%, increasing by 0.67 percentage points compared to the previous month, in an absolute dominant position, unshakable by anyone.
What might be even more surprising is that not only is the strength leading, but the growth rate of the US dollar in global payment currencies is also quite eye-catching.
In May of this year, the US dollar's proportion of global payment currencies was still 42.6%, and by August, this figure had already reached 48%. Although it has slightly retreated now, it still firmly holds the first position.So, since the proportion of the US dollar in global payments has increased, whose proportion has decreased?
The answer is the euro.
Although it has a solid foundation and transactions within the eurozone are considered "international settlements," meaning they can "generate their own transactions," the euro is still showing a clear downward trend.
In March of this year, the payment share of the euro was still 32.64%, but in just seven months, the proportion of the euro in global payment currencies has dropped to 23.36%.
The poor performance of the euro is largely due to the impact of US interest rate hikes and the Russia-Ukraine conflict, high inflation pressure in Europe, and currency devaluation, leading to a large influx of businesses and capital into the United States, where they have been "mowed down" by the US. In 2022 alone, the euro depreciated by 11% against the US dollar.
Of course, even so, the euro's second place is still unshakable in the short term. The British pound can rank third because of its close financial dealings with the euro, gaining a lot of support.
As for Japan, which ranks fourth, its payment share in October was 3.91%, although it is temporarily slightly ahead of the renminbi, but everyone should be clear about the current economic situation in Japan. Under the long-term depreciation of the yen, it will be difficult to maintain its current position in the global currency market in the future.
Unexpected decline of the renminbi
The most surprising thing is that in October, the global payment currency ranking of the renminbi decreased by 0.11 percentage points compared to the previous month, with the latest payment share being 3.6%.
It is important to note that in the first nine months of this year, the global payment share of the renminbi directly increased from 1.91% to 3.71%, almost doubling.Why did the Chinese yuan experience a slight decline in October?
To be honest, the world's top five most active currencies have always been very stable, with the US dollar, euro, and pound sterling holding the top three positions, almost without any significant changes. The Japanese yen and the Chinese yuan have been competing with each other, but their market shares have also been hovering in the single digits, not on the same order of magnitude as the US dollar and the euro.
Therefore, in the short term, whether the yuan's share increases or decreases a bit, the impact is not that significant. We should pay more attention to the long-term trend.
It is also worth mentioning that this global payment currency ranking is based on the statistics of the SWIFT system. However, as we all know, in addition to SWIFT, we have also established our own CIPS, which is the Cross-Border Interbank Payment System (CIPS) for the Chinese yuan.
The cross-border settlement of the Chinese yuan conducted through CIPS is not included in the statistics.
As of the end of October this year, there were 1481 participants in CIPS, including 119 direct participants and 1362 indirect participants, distributed in 111 countries and regions around the world, and the actual business covers more than 4300 legal banking institutions in 182 countries and regions around the world.
Therefore, if CIPS is taken into account, the payment scale of the Chinese yuan in international settlement will definitely increase. It is difficult to fully reflect the actual situation of the Chinese yuan by only looking at the data of the SWIFT system.
Can "de-dollarization" be achieved?
Seeing this, many people may have a question:
Isn't there a constant clamor for "de-dollarization"? How come after shouting the slogan for a long time, the US dollar is still so strong? Isn't "de-dollarization" just a futile effort?First and foremost, it is essential to understand that "de-dollarization" is destined to be a long-term process. It is impossible and unrealistic to expect the dismantling of the dollar's hegemony and the establishment of a new order in the global currency market within a year or two.
Secondly, the status of the US dollar is not absolutely unshakable. Over the past 20 years, the proportion of the dollar has been on a downward trend.
When measuring the international status of a currency, we often consider three aspects: foreign exchange reserves, commodity pricing, and payment tools.
In terms of foreign exchange reserves, the proportion of the dollar has decreased from 72% in 2000 to 59% in 2022.
Furthermore, as a payment tool, the proportion of the dollar has also declined from around 70% in 2000 to the current 47%.
Therefore, although the dollar is still the absolute hegemon in the global currency market today, "de-dollarization" is a long-term trend, and the status of the dollar is being shaken bit by bit.
As more and more countries recognize the risks of the dollar being frequently "weaponized" and start to diversify their currency reserves and establish settlement mechanisms in their own currencies, the "de-dollarization" wave will naturally sweep every corner of the world.
From a long-term perspective, no currency can always dominate, let alone the dollar, which has been "deeply despised" by many people. This is also an opportunity for the renminbi to accelerate its internationalization in the future.
Ultimately, it is the United States' own reckless actions that will push the dollar into the abyss, destroying the foundation of the dollar's hegemony.