Dollar dominance – why the world’s most traded commodity isn’t oil

Every day, $9.6 trillion changes hands in global foreign exchange markets. Global crude oil demand runs at approximately 103 million barrels per day — roughly $10 billion at current prices. The daily foreign exchange market is, in other words, nearly a thousand times larger than the global oil market by transaction value. The comparison requires a caveat: the dollar is not a commodity in the same category as oil or wheat. A settlement medium for global commodity trade operates at a different order of magnitude than the underlying commodities it prices, and stacking those figures against each other is almost methodologically absurd. But understanding why the comparison is absurd illuminates something far more consequential than a trading-volume statistic: how financial architecture encodes power, and why the structural position of the US dollar in the global economy is both more durable and more vulnerable than it appears.

The Commodity Leaderboard and Its Limits

The question of which commodity is most traded depends entirely on what register of trading you measure. Physical volume — tonnes, barrels, cubic metres, bushels — produces one answer. Financial contract volume, measured in notional value of futures and spot transactions, produces another. The two rankings diverge sharply and for reasons that matter.

By physical volume, crude oil dominates the energy complex. Global demand runs at approximately 103 million barrels per day, and that demand drives a corresponding volume of physical trade across tanker routes, pipelines, and storage infrastructure. Natural gas is the second great energy commodity, but its market is structurally different: pipeline infrastructure fragments gas pricing across regional markets — European TTF, US Henry Hub, Asian JKM — rather than converging on a single global benchmark. That fragmentation limits its comparability to oil and makes its “trading volume” harder to aggregate meaningfully at a global scale.

Agricultural commodities — wheat, soybeans, corn — are enormous by physical tonnage and support some of the world’s most liquid futures markets. Coffee occupies a significant share of global export value but is small relative to the grains. None of these, individually or combined, approaches the scale of the oil trade by financial volume.

Then there is foreign exchange. The April 2025 BIS Triennial Survey reported daily FX turnover of $9.6 trillion. Annual global wheat trade amounts to roughly $50 billion. Global coffee exports ran to approximately $51 billion in 2024. The daily FX figure exceeds the annual value of either trade many times over. By the measure of daily financial transaction volume, currencies — and specifically the US dollar — are not in the same category as any physical commodity.

The objection is obvious: calling a currency a “commodity” is a category error. In everyday use, “commodity” has come to mean physical stuff — something grown, extracted, or refined. Economists use the term more broadly, for any standardised, interchangeable good, but even that usage typically preserves the sense of materiality. Currency is not grown or extracted. It is issued, managed, and held as a claim.

What makes something a commodity? In economics, a commodity is any standardised, fungible good — meaning one unit is interchangeable with another of the same grade. By that definition, currencies qualify: a dollar is a dollar, and the foreign exchange market is, in structural terms, a commodity market for national currencies. Traders, for their part, treat major currencies exactly like other liquid commodities: they are bought, sold, stored, and hedged using the same instruments (futures, options, swaps) that apply to oil or wheat. The semantic boundary matters for the argument that follows because the popular assumption — that the "most traded commodity" must be a physical thing — is exactly what conceals how the global economy actually works. The definitional question is not merely academic: how the question is framed determines what counts as a serious candidate for the answer, and the category of "physical stuff" produces systematically misleading results when applied to a system whose real architecture is financial.

Expanding the frame produces a genuine answer. What that answer does not explain, by itself, is why the dollar occupies the position it does within it.

Why the Dollar Wins

The Bank for International Settlements’ April 2025 Triennial Survey found that the US dollar appeared on one side of 89.2% of all over-the-counter FX transactions — up from 88.4% in 2022. Every transaction counted twice, so the maximum possible share for any currency is 100%. The euro, the second most traded currency, appeared in 28.9% of trades. Dollar share is rising.

Those figures would be remarkable for a country whose GDP is roughly a quarter of global output. They are not the product of market preference in any simple sense. They reflect the structure of the global trade system — specifically, the convention of invoicing international trade in dollars regardless of whether the United States is a party to the transaction.

The Federal Reserve’s 2025 FEDS Note on the international role of the dollar documents this with precision. Across global export invoicing — meaning the currency in which cross-border trade contracts are denominated — the regional figures are stark: 96% of trade invoiced in dollars across the Americas, 74% in Asia-Pacific, 79% in the rest of the world. These figures cover the period 1999 to 2019, but no subsequent data has overturned the pattern. A Japanese company buying Malaysian palm oil does not transact in yen or ringgit. The contract is written in dollars, the payment is made in dollars, and somewhere in that chain a foreign exchange transaction occurs — converting one national currency into dollars, and eventually dollars into another. That FX transaction enters the BIS data.

The causal direction matters. Dollar dominance in foreign exchange markets is not an independent fact about currency preferences; it is a downstream consequence of invoicing convention. The $9.6 trillion daily figure is not the cause of dollar supremacy — it is the symptom. Understanding what produced the invoicing convention requires going further back.

Once the mechanism is visible, the scale is not surprising. It is specifically this large because of an architectural decision — not a random equilibrium — about how global trade would be priced. That decision has a history.

The Architecture of Dependence

The dollar did not become the world’s settlement currency because the United States was the largest economy, or because American exporters negotiated favourable terms, or because of some organic market preference. The postwar monetary order was a deliberate construction.

At the Bretton Woods Conference in 1944, the United States — at that point the world’s largest creditor nation and the holder of the majority of global gold reserves — secured an arrangement that made the dollar the anchor of the international monetary system. Other currencies were pegged to the dollar; the dollar was convertible to gold at $35 per ounce. The International Monetary Fund and the World Bank were established to manage the system. From 1944, the dollar was not merely one currency among many: it was the unit in which international obligations were settled and in which exchange rates were expressed.

When Richard Nixon suspended dollar-gold convertibility in August 1971, ending the Bretton Woods system, the dollar did not lose its central position. By 1971, the global financial system was organised around something larger than the Bretton Woods rules: the eurodollar market. Dollar-denominated deposits held outside the United States had grown steadily through the 1950s and 1960s, creating a vast pool of dollar liquidity beyond any government’s direct control. US Treasury markets offered depth, liquidity, and legal predictability that no alternative could match. The dollar’s position after Bretton Woods was, if anything, less constrained: no longer bound by the obligation to convert dollars to gold, the US could run deficits without the discipline that gold convertibility had theoretically imposed.

That pre-existing dollar centrality is the foundation on which what came next was built.

In 1973 and 1974, in the aftermath of the OPEC oil embargo, a bilateral political arrangement was constructed between the United States and Saudi Arabia, facilitated by Secretary of State Henry Kissinger. The specific content of those negotiations remains partially undisclosed — the arrangement was never formalised as a multilateral treaty — but the structure is documented in detail by David Spiro in The Hidden Hand of American Hegemony (1999) and by Andrew Cooper in The Oil Kings (2011). Saudi Arabia agreed to continue pricing its oil exports in dollars, and to recycle surplus dollar revenues into US Treasury bonds and dollar-denominated financial assets. The United States provided security guarantees, military equipment, and political backing. OPEC as a body never signed a formal commitment to price oil in dollars; the convention spread through the cartel and then to global commodity markets through network effects. Once the world’s largest energy commodity was universally priced in dollars, the transaction cost of denominating other commodities in other currencies was prohibitive.

How petrodollar recycling works The petrodollar feedback loop operates as follows. Oil-exporting countries earn dollar revenues from sales priced in dollars. Those revenues accumulate as dollar surpluses that must be invested somewhere. Since the late 1970s, a significant portion of those surpluses has flowed into US Treasury bonds and US financial assets — a process economists call petrodollar recycling. The consequence is structural. Oil exporters effectively finance US government borrowing, which puts downward pressure on US interest rates, which makes dollar-denominated assets more attractive to other investors, which sustains global demand for dollars, which sustains the invoicing convention that generates the surplus in the first place. The loop is self-reinforcing: dollar pricing creates dollar surpluses, dollar surpluses flow back into dollar assets, dollar assets sustain the attractiveness of dollars, which sustains dollar pricing. The arrangement also subsidises the US ability to run persistent trade deficits — other countries accept dollars in payment not because they have to but because they need them to buy oil and to hold as reserves. The political character of the original arrangement — bilateral, informal, dependent on US security credibility — means it is not written in treaty language and does not require renegotiation. It also means its durability depends on the United States maintaining the security commitments and financial credibility that make it worth sustaining.

Because oil is an input cost for almost every manufactured good, the dollar’s position in energy pricing cascades outward. A manufacturer in Vietnam buying Indonesian crude, a shipping company in Greece paying for fuel, a fertiliser producer in Brazil purchasing natural gas feedstock — all of these transactions are conducted in dollars or denominated against dollar benchmarks. The currency reaches deep into supply chains that have no direct connection to the United States.

Understanding why oil is priced in dollars is, however, not the same as understanding how those dollars actually change hands. The invoicing convention is one layer of the architecture. The payment infrastructure is another.

The Plumbing: Correspondent Banking and SWIFT

International payments do not move through a direct channel between payer and recipient. Most banks — including most large banks outside the United States — do not maintain direct bilateral relationships with banks in every other jurisdiction. They process cross-border payments through correspondent banks: larger institutions, typically US-regulated, that hold accounts on behalf of their foreign counterparts and process transactions through those accounts.

Any bank that wishes to clear US dollars must maintain a correspondent relationship with a US-regulated institution. The implication is significant. US banking regulators, and through them US law enforcement and sanctions authorities, have de facto jurisdiction over virtually any international transaction denominated in dollars, regardless of whether any US party is involved. A trade between a Singaporean company and a South African one, invoiced in dollars, settled through a correspondent bank in New York, passes under US regulatory oversight. Not because the US is a party to the transaction — but because the dollar requires it.

SWIFT — the Society for Worldwide Interbank Financial Telecommunication — is the messaging network through which 11,500 or more financial institutions in over 200 countries authorise international payments. As of January 2025, 50.2% of all payments processed through SWIFT were denominated in dollars, according to Bloomberg data published on February 20, 2025. SWIFT is not exclusively dollar infrastructure: transactions in euros, sterling, yen, and other currencies all flow through it. But the dollar’s share of SWIFT traffic reflects and reinforces the correspondent banking structure that makes dollar clearing mandatory for so many international transactions.

SWIFT is not the source of dollar power. The network is a transmitter, not a generator. The actual source is the correspondent banking architecture, which gives US regulators reach into any dollar transaction anywhere in the world. SWIFT makes that architecture legible and interconnected; the real leverage operates at the level of clearing.

Russia, SWIFT, and the double-edged weapon In February 2022, following Russia's invasion of Ukraine, Western governments removed seven Russian banks from the SWIFT messaging network — VTB Bank, Vnesheconombank, Rossiya Bank, Sovcombank, Bank Otkritie, Novikombank, and Promsvyazbank — with Sberbank, Russia's largest, initially exempted to preserve EU energy payment flows and removed in a subsequent round of sanctions roughly three months later. The action was widely described as unprecedented, and the immediate effect was significant: Russian institutions lost access to the standard infrastructure for international payments, complicating trade finance, correspondent banking, and foreign exchange transactions. The longer-term effect has been more complicated. Russia accelerated its use of SPFS, its domestic financial messaging system, and expanded bilateral settlement arrangements with China, India, and other trading partners. China's Cross-Border Interbank Payment System (CIPS), already operational, became a more attractive alternative infrastructure for non-Western institutions seeking to reduce SWIFT exposure. The mBridge project — at the time still under BIS innovation hub auspices — moved further up development agendas. What the 2022 exclusion demonstrated is both the extraordinary reach of SWIFT-denominated dollar infrastructure and its specific vulnerability: the very power of exclusion as a foreign policy tool gives other actors a concrete incentive to build alternatives. The weapon educates its targets. That dynamic is already reshaping the longer-term trajectory of dollar infrastructure — not by displacing it, but by accelerating the construction of parallel systems that reduce dependence at the margin.

The correspondent banking structure makes dollar dominance operationally entrenched — not in the sense that alternatives are literally impossible, but in the sense that building credible alternatives requires years of investment, regulatory coordination, and liquidity provision that cannot be shortcut by political declaration. The infrastructure creates inertia. The name for that inertia, coined by a French finance minister sixty years ago, is worth examining closely.

The Exorbitant Privilege

The phrase was coined by Valéry Giscard d’Estaing, serving as French Finance Minister in the mid-1960s, and it named something specific: the ability of the United States to accumulate foreign debt in a currency it alone could issue. It is frequently attributed to Charles de Gaulle — who was certainly its most theatrical critic. At a press conference on February 4, 1965, de Gaulle made the complaint formal: the United States could be indebted to the world effectively free of charge, running deficits covered in dollars that other countries were obliged to hold. The privilege belonged to the issuer of the reserve currency. The cost was borne by everyone else.

The privilege has three concrete dimensions, but they are not three separate entitlements — they are one self-reinforcing system that Giscard’s phrase compressed into a single grievance.

Central banks worldwide hold dollars as reserves. IMF COFER data for 2024 puts the dollar’s share of global foreign exchange reserves at approximately 57.8%. That reserve demand creates structural demand for US government debt — foreign central banks accumulate dollars primarily by purchasing US Treasury bonds — which subsidises US borrowing costs. Lower borrowing costs enable the US to fund the military and political commitments that sustain the security guarantees underlying the petrodollar arrangement, which sustains the invoicing convention, which sustains reserve demand. The circuit is closed. Eichengreen (2011) describes this as a self-perpetuating equilibrium — not a natural outcome but a constructed one that reproduces itself through the incentives it creates.

The second dimension is the ability to run persistent current account deficits without triggering a balance-of-payments crisis. Other countries must earn foreign currency to pay for imports; a country running a deficit must at some point correct it, either through depreciation or through adjustment of domestic demand. The United States pays for imports in dollars, and other countries need those dollars — to settle oil contracts, to service external debt, to hold as reserves. Gourinchas and Rey (2007) document this in “From World Banker to World Venture Capitalist”: the US borrows short-term in dollars and invests long-term in foreign assets, extracting a return differential that amounts to an implicit insurance premium on the dollar’s reserve status. The privilege is not static; it generates income.

The third dimension is sanctions power. Dollar infrastructure gives the United States the ability to impose financial isolation on adversaries at relatively low direct cost to itself. Exclusion from correspondent banking or SWIFT is not merely an inconvenience; for a country deeply integrated into dollar trade flows, it can be economically severe. That leverage has no equivalent among any other currency issuer.

The distributional critique is real and cannot be dismissed as foreign resentment. The privilege accrues primarily to the US financial sector and to the government’s borrowing capacity. Its costs — chronic current account deficits, suppressed export competitiveness, hollowed manufacturing sectors — fall disproportionately on American workers in traded industries. Dollar dominance reinforces the conditions under which persistent deficits are easier to sustain — though the causal relationship between reserve currency status and manufacturing decline is contested, and technological change, labour market institutions, and trade policy all carry substantial independent weight. The political backlash against those structural consequences is now a durable feature of American politics, and it shapes the domestic sustainability of the privilege in ways that geopolitical rivalry does not.

The Genuine Threats, and the False Ones

The loudest claims about dollar displacement come from geopolitical declarations: BRICS summits announcing de-dollarization agendas, discussions of a petroyuan, Chinese and Russian officials announcing the imminent end of dollar hegemony. Measured against the structural realities established in the preceding sections, these claims do not survive scrutiny — not because dollar dominance is permanent, but because declarations are not architecture.

The yuan’s position in the international financial system illustrates the gap. IMF COFER data puts yuan holdings at approximately 2% of global foreign exchange reserves. SWIFT data from May 2024 — the most recent figure available at time of writing — places the yuan at 4.7% of global payments. Neither figure suggests a currency on the verge of displacing the dollar. The structural constraint is not ambition: it is convertibility. China maintains capital controls that prevent the free movement of yuan across borders that a genuine reserve currency requires. An international reserve asset must be held, moved, and deployed by foreign central banks and financial institutions without restriction. The yuan cannot currently be that. This is not a permanent condition — capital account liberalisation is technically feasible — but it is a real constraint that BRICS communiqués do not address, and it requires policy choices that carry substantial domestic costs.

The distinction between de-risking and de-dollarization matters here. Countries are reducing their exposure to dollar infrastructure — diversifying foreign exchange reserves, expanding bilateral settlement agreements, investing in alternative payment systems — without having a viable substitute. These are not equivalent to displacement; they are hedging strategies, and their cumulative effect is dilution rather than replacement.

Reserve diversification is the most gradual and least dramatic of the genuine threats. The dollar’s share of global foreign exchange reserves has declined from 72% in 2001 to 57.8% in 2024, according to IMF COFER data. The decline is slow and non-linear — there have been years of stability and even partial reversal — but the direction is consistent over a twenty-year period. About fourteen percentage points is not a marginal adjustment; it represents a structural shift in the composition of central bank portfolios. The dollar remains dominant, but its dominance is contracting at the margin, and that contraction does not require a successor.

More structurally disruptive, if slower to materialise, is the construction of alternative payment infrastructure. China’s Cross-Border Interbank Payment System (CIPS) is operational and growing. The mBridge project — a multi-currency cross-border payment platform developed under BIS auspices and now handed to its participating central banks — reached minimum viable product stage in 2024, when the Bank for International Settlements transferred the project to the participating central banks: China, Thailand, Saudi Arabia, Hong Kong, and the UAE. By late 2025, mBridge had processed $55.49 billion in cumulative transaction volume. That figure is small against SWIFT’s daily traffic, but it is not zero, and the trajectory matters more than the current volume.

CIPS and mBridge: the alternative plumbing CIPS — China's Cross-Border Interbank Payment System — launched in 2015 as a yuan-denominated correspondent banking and settlement system. It is designed to allow international institutions to settle yuan transactions without routing through SWIFT or dollar correspondent banking chains. As of 2024, CIPS had over 1,500 direct and indirect participants across more than 100 countries. Its transaction volumes remain a fraction of SWIFT's, but CIPS is growing, particularly in trade corridors between China and Southeast Asia, the Middle East, and parts of Africa. mBridge is a different type of project: a multi-central-bank digital currency platform designed to allow direct cross-border settlement between participating central banks using digital currencies, bypassing correspondent banking entirely. Developed initially under the BIS Innovation Hub, the project moved to the phase of handing operational control to its participating central banks — China, Thailand, Saudi Arabia, Hong Kong, and the UAE — in October 2024. The $55.49 billion in transactions processed through the platform by late 2025 represents proof of concept at minimum viable scale. Neither CIPS nor mBridge represents an imminent replacement for SWIFT; both represent serious infrastructure investments that reduce the technical barriers to non-dollar settlement at the margin. The development trajectory is the signal, not the current volume.

The least visible and most proximate threat is the domestic political economy of the privilege itself. The exorbitant privilege requires the United States to run persistent current account deficits, absorbing the world’s dollar savings in exchange for Treasury bonds and financial assets. The structural consequence of that arrangement — suppressed manufacturing, chronic trade deficits in goods — has become one of the defining fault lines in American domestic politics. The privilege requires a political willingness to sustain open capital accounts, deep Treasury markets, and international financial commitments. That willingness is not guaranteed, and its erosion from within is a more proximate threat than any external rival’s currency.

The most proximate threat to dollar dominance is not an external rival’s currency. It is the internal political sustainability of the costs the privilege imposes — and the slow, largely invisible construction of alternative infrastructure by actors who have concrete incentives to reduce their dependence on a system they cannot control.

Closing

The article began with a number: $9.6 trillion, daily, in foreign exchange markets. At that point the number was simply large — a comparison designed to make crude oil look modest, and the dollar look anomalous.

Having traced the architecture behind it, the number means something different. The $9.6 trillion is not an independent market phenomenon; it is the aggregate expression of a system built in specific places — Bretton Woods in 1944, a Kissinger-brokered bilateral in Riyadh in 1974, the correspondent banking architecture that gives US regulators jurisdiction over transactions they are not party to. The system was built through deliberate settlements, political bargains, and market conventions that hardened into infrastructure — and each component reinforces the others.

The mechanisms that built dollar dominance were largely visible and largely deliberate. The mechanisms that will erode it are largely invisible and incremental: a slow decline in reserve share, a growing CIPS participant list, a multi-central-bank digital platform processing volumes that are small today and directional tomorrow, a domestic political coalition that has decided the costs of the privilege are real and not worth bearing. None of these developments is a displacement event. Taken together, they represent dilution at the infrastructure level — not a headline shift in the dollar’s share of tomorrow’s BIS survey, but a quiet diversification of the plumbing beneath it.

What is already changing is not the figure at the top of this article. It is the architecture that figure depends on.

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Key Sources and References

Bank for International Settlements. Triennial Central Bank Survey: OTC Foreign Exchange Turnover in April 2025. Press release, September 30, 2025.

Bertaut, Carol C., Stephanie E. Curcuru, and Bastian von Beschwitz. “The International Role of the U.S. Dollar – 2025 Edition.” FEDS Notes No. 2025-07-18-1. Board of Governors of the Federal Reserve System, July 18, 2025.

International Monetary Fund. Currency Composition of Official Foreign Exchange Reserves (COFER). 2024 Q4 data.

Eichengreen, Barry. Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System. Oxford University Press, 2011.

Gourinchas, Pierre-Olivier, and Hélène Rey. “From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege.” In G7 Current Account Imbalances: Sustainability and Adjustment, edited by Richard Clarida. University of Chicago Press, 2007.

Spiro, David E. The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets. Cornell University Press, 1999.

Cooper, Andrew Scott. The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East. Simon & Schuster, 2011.

Federal Reserve Bank of Richmond. “What Is SWIFT, and Could Sanctions Impact the U.S. Dollar’s Dominance?” Richmond Fed Economic Brief 22-09. March 2022.

Bloomberg. “US Dollar’s Use in Global Transactions Tops 50%, Swift Says.” February 20, 2025.

Council of the European Union. “Russia’s Military Aggression Against Ukraine: EU Bans Certain Russian Banks from SWIFT System and Introduces Further Restrictions.” Press release, March 2, 2022.

Atlantic Council. “What to Watch as China Prepares Its Digital Yuan for Prime Time.” Econographics (blog). January 15, 2026.

CIPS (Cross-Border Interbank Payment System). Annual Report 2024. CIPS Co., Ltd., 2024.