Dollar trade on SWIFT increases as SWIFT share of Global transactions decreases

By Anna Koroleva

In July 2023, the share of the dollar in international settlements, according to the Swift system, rose to a record 46.5%. However, as experts note, the share of settlements going through Swift itself is noticeably decreasing, so that its statistics no longer reflect the entire turnover of international trade, but transactions within one, albeit the largest, “platform”.

The share of yuan in settlements through Swift has grown 100 times
According to the Swift system, which allows banks from different countries to make payments between themselves, the share of the US dollar in international settlements within the Swift system increased in July to 46.5 from 39.4% a month earlier. This data was cited by Bloomberg with reference to the RMB Tracker report (Renminbi Tracker - “RMB Tracker” - a monthly report on international payments in yuan released by Swift Business Intelligence, which includes information about other currencies).

Bloomberg points out that the July figures for international settlements have become a record for the dollar. For 10 years, the agency recalled, this currency accounted for a little more than a third of the total volume of settlements.

The second position is still occupied by the euro, but its share in settlements via Swift decreased in July to a historically low 24.4% from 38.4%. And in 2012, the single European currency occupied 46% in the volume of settlements. This was her peak.

In general, it should be noted that the share of currencies in Swift decently jumps. So, in August 2022, the share of the euro was 34.5%.

The third place in July of this year was occupied by the pound sterling (7.6% in July against 6% a month earlier), the fourth position was taken by the yen (3.5% against 2.7%).

And finally, the yuan, which is primarily followed by his personal RMB Tracker, ranked fifth with 3.1% against 2.2% a month earlier. The share of the Chinese currency exceeded 3% for only the second time in the history of observations. And in 2010 it was only 0.03%. That is, for 13 years the indicator has grown 100 times!

Swift is no longer representative
Meanwhile, statistics on settlements should not be misleading - this is the magic of numbers, commented Mikhail Zeltser, an analyst on the stock market at BCS World of Investments. Against the background of the transition to the national currencies of the BRICS countries, their share in the Swift system decreases by itself, and the dollar formally replaces the other currencies.

“But this is no longer an indicator. Supranational payment systems are growing at a doubling rate, commensurate with tens of percent growth in bilateral relations between China, India, Russia, Turkey, Brazil, and South Africa. And there, payments are made mainly in yuan, rupees, rubles, ”the analyst notes.

“The first thing worth noting is the multidirectional dynamics of the shares of the dollar and the euro in international trade,” points out, in turn, Andrey Kochetkov, a leading analyst at the Otkritie Investments global research department. This is partly due to the difference in rates in Europe and the United States, since trading partners not only conduct financial settlements, but also temporarily place their funds in profitable instruments.”

However, the analyst considers the growth of the share of the yuan to 3.1% more interesting. Given the news of recent months, the role of the yuan will continue to grow. Even this week, Brazil and Argentina agreed to conduct trade deals in yuan.

In reality, the role of the yuan is much higher, Andrey Kochetkov confirms. At a minimum, trade between the Russian Federation and China is increasingly translated into settlements in national currencies. However, these transactions take place outside the Swift system. A similar story with other trading partners of the Russian Federation. At the same time, the role of the euro as a trading currency also suffered due to the reduction in export-import operations between the Russian Federation and Europe.

The trend will continue for the foreseeable future, the expert is sure. BRICS confirmed plans to increase the share of national currencies in trade operations. However, many of them will also not go through the Swift system. At the summit in South Africa, BRICS members discussed the creation of a new payment system, although getting rid of Swift is not yet the main goal.

Nevertheless, Andrey Kochetkov believes, the creation of an alternative will make it possible to use national currencies more widely. In the future, this will lead to the fact that Swift statistics will no longer be representative and will mainly reflect only trade between developed markets, but not the global picture.

Plus cryptocurrencies
The euro is reducing its influence, it is affected by the European energy crisis, domestic inflation, the conflict in Ukraine and the active involvement of the EU in the military conflict, commented political scientist, head of the Influence group Nikita Dontsov.

It is noticeable, the expert notes, that part of the market is taken by regional currencies. The dollar will also lose its strength in the medium term, but now, in the context of global turbulence, some countries are pursuing a policy of de-dollarization, while other countries consider the dollar as a protective tool and a safe haven.

Probably, Nikita Dontsov suggests, new transnational currencies will soon appear - perhaps based on the SCO, BRICS or the EAEU. Also today, an increasing share of international settlements is occupied by operations in cryptocurrencies, but Swift statistics do not take into account such operations.