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Currency: The U.S. Is Dominant, Europe Is Fading, And China Is Irrelevant (For Now)

Every day, people around the world trade $5 trillion worth of currency. That's an astonishingly large number; it's equivalent to about four months of economic output for the entire U.S. A new report shows how that $5 trillion is spread among the world's currencies — and how the breakdown has changed over the past few years.

A few key things about the graph:

The U.S. dollar is still the currency of choice for most international transactions, accounting for 44 percent of the global currency trade. In fact, its share of all transactions has actually increased over the past few years.

The euro is the second most traded currency — but its role in the world has fallen significantly in the past few years, largely because of the economic crisis in Europe.

The Mexican peso still accounts for a small share of the global currency markets, but trade in the peso is growing like crazy. This is partly driven by Mexico's strong economic growth. But it's also because, unlike governments in many other developing countries, the Mexican government has made it easy for people to buy and sell the peso.

China is the world's second largest economy – but its currency, the renminbi, accounts for only 1 percent of the global currency trade. That's because the government restricts the renminbi's use in financial activity. This allows China to control the value of its currency relative to the dollar and other key currencies. But China, which wants to be a bigger player in global finance, has been slowly loosening its restrictions on the renminbi — and as result, the currency's share of global trade, while still small, is starting to grow.

Copyright 2023 NPR. To see more, visit https://www.npr.org.