Bloomberg reported today that data released from the Society for Worldwide Interbank Financial Telecommunications, for the first time since February 2013, last month showed the euro beating the dollar as the most used currency for global payments. The data, compiled from 11,000 financial institutions in 200 countries showed that after the euro and dollar, sterling and the Japanese yen followed, with the Canadian dollar overtaking China’s yuan for the fifth spot, according to Swift.
Last month just under 38% of Swift transfers were handled in euros, an increase of approximately 6% from the end of 2019. The dollar was not far behind (just .18%), however, its usage has fallen 4.6% from December ‘19. It peaked at over 45% in April 2015. The other 3 currencies in the top 5 together made up 12.25% of transactions in October.
Of interest was the performance of the yuan, whose share fell to 1.66%, its worst showing since April. However, when Swift started ranking currencies back in October 2010, the Chinese currency was ranked 35th and climbed into the top six four years later. It is now used to settle about 20% of China’s trade.
The Chinese government has long pushed for the internationalisation of the yuan. Over the last few years, they have made progress, introducing commodity contracts priced in yuan and winning official reserve-currency status from the International Monetary Fund. We believe that in the not too distant future, the market share of the world’s second largest economy’s currency will outstrip all others bar the euro and dollar.
We do run an award winning strategy with an overlay of the Chinese yuan, if you would like more details please do not hesitate to contact us.