Fundamentals vs. Policies: Can the US Dollar's Dominance in Global Trade Be Dented?

The US dollar plays a dominant role in the invoicing of international trade, albeit not an exclusive one as more than half global trade is invoiced other currencies. Of particular interest are euro, with large role, and renminbi, rising role. These two currencies well suited to contrast roles economic fundamentals policies, European policy makers have taken neutral stance promotion renminbi by Chinese authorities. We assess drivers using most recent comprehensive data set for 115 countries over 1999-2019. find that standard mechanisms foster use economy's currency predicted theory – i.e. strategic complementarities price setting integration cross-border value chains underpin euro United States area. also support dollar, but between non-US non-euro area countries, making globally currency. Fundamentals policies played contrasted renminbi. China's into has further strengthened status at expense euro. At same time, establishment swap lines People's Bank China been associated increases invoicing, adverse effect on larger