The Dollar Inside Everything

A coffee farmer in Vietnam, a copper mine in Chile and a ship­ping company in Denmark may never deal with an American. Much of what they sell is still priced, invoiced, financed or hedged in US dollars. The dollar is inside a very large number of prices that have nothing to do with the United States.

No con­spir­acy here, and no obit­u­ary. Just plumb­ing: the pipes through which money moves between coun­tries, and why so many of them are sized in one cur­rency.

Invoices

Start with trade. Oil bench­marks are quoted in dollars, and so are most inter­na­tion­ally traded metals and many agri­cul­tural com­modi­ties. Beyond com­modi­ties, econ­o­mists at the IMF and else­where have found that the dollar's share of invoic­ing in world trade is several times larger than the United States' own share of world trade. A Korean exporter selling to Brazil will very often write the invoice in dollars.

That choice spreads. If your sales are in dollars, it is con­ve­nient to borrow in dollars, because your revenue matches your debt. If your sup­pli­ers invoice in dollars, you hold dollars to pay them. Each of those deci­sions is sen­si­ble on its own, and together they make the dollar the default.

Money that settles money

The foreign exchange market is the largest market in the world by turnover. In the Bank for International Settlements' 2022 survey, the dollar was on one side of 88% of all trades, and its share was slightly higher in the 2025 survey. Most pairs of other cur­ren­cies are traded through the dollar rather than directly, because the dollar markets are deeper: it is often cheaper to change pesos to dollars and dollars to rand than to find some­body who wants to swap pesos for rand.

Central banks hold reserves largely in dollars. The IMF's COFER data put the dollar at 56.9% of allo­cated offi­cial reserves in the third quarter of 2025, down from much higher levels at the start of the century and still far above any other cur­rency.

Collateral and funding

Underneath trade and reserves sits funding. Banks and com­pa­nies outside the United States have bor­rowed tril­lions of dollars, and banks outside the US hold dollar assets financed with short-term dollar bor­row­ing. US Treasury secu­ri­ties are the col­lat­eral of choice in much of that bor­row­ing, includ­ing the repo market on which SOFR, described in Act I, is built.

The con­se­quence shows up in bad weeks. When investors every­where rush for safety at once, they want dollars, and bor­row­ers outside the US who need dollars to roll their debts find them expen­sive or unavail­able. In March 2020 the Federal Reserve extended dollar swap lines, arrange­ments to lend dollars to other central banks against their own cur­ren­cies, to a wider group of coun­tries, pre­cisely to ease that pres­sure.

New rails, same cur­rency

Crypto markets repro­duce the pattern. The largest sta­ble­coins, tokens designed to hold a steady value, are almost all denom­i­nated in dollars, and as the cover story showed, four of the five venues in this issue's frozen second priced bitcoin in a dollar token rather than in dollars. A trader in Asia buying bitcoin on those venues is, one layer down, making a deci­sion priced in the dollar.

Dollars that never lived in America

A large share of the world's dollars are held and lent outside the United States. The market has a history. In the 1950s and 1960s banks in London began taking deposits and making loans in dollars, outside the reach of American banking rules. The dollars held abroad this way came to be called eurodol­lars, after the European banks that first held them. They have nothing to do with the euro, which did not yet exist.

That off­shore dollar system grew into the main way the rest of the world borrows the cur­rency. LIBOR, the rate dis­cussed in Act I, was the price of bor­row­ing those off­shore dollars between banks. Its replace­ment, SOFR, is a rate on bor­row­ing inside the American Treasury market. The move from one to the other is also a move from a price made in London to a price made in New York.

Offshore dollars have no central bank of their own. A bank in Seoul or Frankfurt that has lent dollars it bor­rowed short-term cannot print more when the lending stops. That is why, in the worst weeks, the price of dollars outside the United States can rise faster than inside it, and why the Federal Reserve's swap lines matter far beyond America.

What the plumb­ing does and does not mean

A con­nec­tion says nothing about its strength. The dollar's exchange rate does not move a dollar-invoiced com­mod­ity one for one; supply and demand for the com­mod­ity move it too, often far more. An emerg­ing market with dollar debts is more exposed to a strong dollar than one without, by an amount that depends on its revenue, its reserves and its policy. The plumb­ing tells you where pres­sure can travel. It does not tell you how much will arrive.

It also does not tell you how long the arrange­ment lasts. Reserve shares move slowly, over decades; the dollar's share has fallen from above 70% around the turn of the century to below 60% now, while its role in trading and funding has barely moved. Plumbing is hard to replace, because every pipe is con­nected to every other, and because the value of a common cur­rency comes pre­cisely from the fact that every­body else is already using it.

The dollar sets very few prices directly. A sur­pris­ing share of the world's prices still flow through it.