Bruce, Australia – October 1 – Despite frequent headlines about the supposed decline of the US dollar, new data suggests it remains the undisputed king of the global foreign exchange (forex) market.
A recent survey from the Bank for International Settlements (BIS) reveals that global forex trading has skyrocketed to nearly USD 10 trillion per day—a staggering contrast to global trade in goods and services, which stands at only USD 0.1 trillion per day.
Only 1% of Forex Tied to Real Trade
The vast majority of currency trades are not linked to buying goods or services. Instead, they are speculative financial movements—hedging against currency fluctuations or outright gambling on market swings.
April 2025 saw a particularly sharp rise in trading activity, likely driven by the “liberation day” tariffs imposed by former President Donald Trump. Volatility in the markets triggered a surge in speculative and hedging trades, with total turnover rising 28% from April 2022.
Dollar Still on Top
In an overwhelming 89% of all forex transactions, the US dollar plays a role. Following it are the euro (29%), Japanese yen (17%), and the British pound (10%). The Chinese renminbi has seen significant growth, now involved in 8.5% of trades—but still a long way from threatening the dollar’s supremacy.
Australia’s Currency Packs a Punch
Despite its relatively small economy, the Australian dollar holds the seventh-most traded currency spot, involved in 6% of trades—surpassing larger economies like India, Brazil, and Russia. This may be due to its reputation as a “commodity currency” and a stand-in for less accessible Asian currencies.
Where Forex Happens
Three-quarters of global currency trading takes place in just four financial powerhouses: London, New York, Singapore, and Hong Kong.
Challengers to the Throne?
While central banks are holding less US dollar in reserves (down from 65% in 2016 to 58% now), the dollar’s role in forex remains largely unchanged since 1989. Even with growing dissatisfaction from BRICS nations, which are pushing for trade in their local currencies, history shows that dominant currencies decline slowly.
Much like global platforms such as Uber and Facebook, once a currency dominates, network effects make it harder to replace. For example, Australian exporters may choose to trade in US dollars as an intermediary, rather than convert directly from currencies like the Thai baht.
Stabilizing or Destabilizing Force?
Some argue that this massive scale of trading helps stabilize markets, while others say it amplifies volatility. The idea of implementing a Tobin tax—a tiny levy on each transaction—has been floated, but is unlikely, especially in the current pro-market political climate.
