November 14, 2019 / 8:47 AM / a month ago

Factbox: Dollar domination - why global markets depend on the U.S. currency

(Reuters) - From the dominant reserve currency for central banks to the main conduit for global trade and borrowing, U.S. dollars are the lifeblood for banks and markets around the world.

A Fed research paper estimated in 2017 that as much as 70% of all dollars are held outside the United States and 60% of all $100 bills circulated overseas.

Another Fed paper this year said roughly half the 1.6 trillion of dollar banknotes in circulation were outside the United States.

Markets got a reminder of the greenback’s hegemony in September when a squeeze in overnight dollar funding rates in New York sent shivers across the world.

Governments and central banks have tried to reduce their dollar-dependency, with Bank of England governor Mark Carney describing its role in the world economy as “destabilizing”. But de-dollarisation is likely to take many years.

Here are some ways the dollar is used:

CENTRAL BANK RESERVE HOLDINGS

For an interactive version of this chart, click here here

INVESTMENTS AND BORROWING

For an interactive version of this chart, click here here

Graphics by Ritvik Carvalho; Editing by Alexander Smith

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