Dollar Dominance Intact as U.S. Fines on Banks Raise Ire
By Yalman Onaran
The record fine imposed on France’s’s largest bank over transactions in U.S. dollars revived European complaints about the greenback’s pre-eminence in global finance. History shows calls to supplant the currency will be futile. The dollar hasn’t budged from its top spot for the past three decades, withstanding repeated efforts to unseat it. Almost 90 percent of the $5.3 trillion a day in foreign-exchange transactions last year involved the dollar, the same share as in 1989, data from the Bank for International Settlements show. More than 80 percent of trade finance was done in dollars in 2013, according to Swift, a global financial-messaging network. The dollar is also dominant in commodities markets. Of 1,785 active commodities-futures contracts, 1,133 are denominated in dollars, according to data compiled by Bloomberg. U.S. regulators can go after foreign banks doing dollar transactions anywhere in the world because almost all are routed through two clearing networks in the U.S. Clearing of dollar transactions in Hong Kong and Singapore, though available for almost two decades, hasn’t taken off. Those two cities account for less than 1 percent of the global total, BIS data show. “The Fed provides dollar liquidity, so dollar clearing will happen here,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc. in Washington, which consults for some of the world’s largest banks on financial regulation. “That’s why the Fed and other U.S. regulators worry about what foreign banks do. At the end, the U.S. is on the hook.”