GLOBAL SWIFT BANKING SYSTEM STATISTICS SUGGESTS US$ LIKELY TO SOON RALLY

The U.S. accounts for less than 25% of the global economy and that number will be in steady decline amid the rapid growth of China and India. And yet the dollar still takes up almost 63% of global FX reserves. That mismatch will gradually narrow over time especially with the recent introduction of the PetroYuan Futures trading system.

It turns out the dollar’s share of global Swift payments has provided an excellent guide for this theme over the past five years, with roughly a 20-month lead.

The dollar’s percentage of global Swift payments started climbing rapidly from a 31% share in November 2012. The Bloomberg Dollar Spot Index commenced its own rapid ascent 19 months later. Dollar dominance peaked at more than 45% of Swift payments in April 2015 and has been trending lower since. It’s now back to 38%. The BBDXY topped out exactly 20 months later.

The message from the Swift data is clear. The world is trying to wean itself off the dollar.