The three ways a currency gets used outside its own country

"The dollar dominates global finance" is the kind of sentence that gets repeated without anyone saying what it would mean to check it. There are in fact three separate things it could mean, they are measured by three different institutions, and they answer different questions.

Key Takeaways

• Official reserves are measured by the IMF: the dollar was 57.13 per cent in 2026Q1, the euro 20.03 per cent.
• Trading turnover is measured by the BIS every three years: the dollar was on one side of 89 per cent of trades in April 2025.
• Physical banknotes abroad are estimated by the Federal Reserve: about 60 per cent of US currency at the end of 2022.
• Each measure answers a different question, and a currency can lead one without leading another.
• None of the three says anything about which way an exchange rate is moving.

Measure one: what governments hold

Central banks hold foreign exchange reserves, and the IMF publishes what those reserves are made of through a dataset called COFER, the Currency Composition of Official Foreign Exchange Reserves. It reports the world total of official reserves by currency, covering the dollar, euro, renminbi, yen, sterling, Australian dollar, Canadian dollar, Swiss franc and others.

The IMF's data brief puts the US dollar's share at 57.13 per cent in the first quarter of 2026, up from 56.42 per cent in the last quarter of 2025, with the euro at 20.03 per cent, down from 20.38 per cent.

Two details make that number more useful than it looks.

The first is methodological. From the third quarter of 2025 the IMF eliminated the "unallocated" portion of the dataset, so the published composition now accounts for the whole of world reserves rather than only the part countries had itemised, and the revision was applied back to 2000Q1. Anyone comparing a recent figure against an older published one needs to know that the basis changed.

The second is about interpretation. The IMF attributes roughly half of that quarterly increase to exchange-rate valuation effects. Reserves are held in many currencies and reported in one, so when the dollar appreciates, the dollar's share can rise without any central bank buying a single dollar. A change in this series is not automatically a change in behaviour.

Measure two: what gets traded

Every three years the Bank for International Settlements surveys the world's foreign exchange turnover. In April 2025 the US dollar was on one side of 89 per cent of all trades, ahead of the euro at 28.9 per cent and the yen at 16.8 per cent.

This measures something quite different from reserves. Reserves are a stock held for future use; turnover is a flow, and it captures the dollar's role as an intermediary. Two currencies with no American connection are frequently converted through the dollar, because that is where the depth is, and each of those conversions counts the dollar twice over the pair.

State plainly what turnover does not measure: it says nothing about a currency's value or its direction. A currency can be traded enormously while falling, and heavy trading is a sign of usefulness rather than of strength.

Measure three: what is in people's pockets

The third measure is the most physical and the hardest to observe. Cash abroad cannot be surveyed, because nobody registers a banknote when it crosses a border, so it has to be estimated.

Ruth Judson's study of banknote demand for the Federal Reserve concludes that about 60 per cent of all United States currency, and about 70 per cent of hundred-dollar notes, were held outside the country at the end of 2022, with the paper's several methods centring on a range of 50 to 60 per cent.

The concentration in the largest denomination is the informative part. A currency used abroad for everyday shopping would show up across denominations; one held abroad as a store of value shows up in the biggest notes, because storing value in small notes is inconvenient. The distribution tells you what the cash is for.

That also explains why anyone holds it. Physical foreign currency requires no functioning banking system, no counterparty and no permission. Where local money is unstable or the banking system is hard to reach, a large-denomination foreign note is a savings instrument that works without infrastructure.

Why the three measures do not have to agree

A currency can lead one of these and not the others, and the differences are informative.

A currency can be widely held in reserves without circulating as cash, because central banks hold claims and securities rather than banknotes. A currency can be heavily traded without being widely held, if its main role is as an intermediary in other people's transactions. And a currency can circulate physically in a neighbouring country without featuring in that country's reserves at all - sometimes by treaty, as with two currencies that undertook to accept each other at par.

So when a claim is made about a currency's international standing, the first question is which of the three is being talked about. They are not interchangeable, and the answer usually is.

What this changes for someone converting money

Mostly it explains availability rather than price.

A currency that leads all three measures is the one an Australian bank is most certain to hold, the one most likely to be accepted by a terminal outside its own country, and the one most likely to be usable in a place with no formal connection to its issuer. That is a statement about how easy it is to obtain and spend, not about what it costs on the day.

Where to look next

The AUD to USD page carries the live reference rate and a short block on what kind of money the US dollar is. For the forces that move the pair, what drives the Australian dollar against the US dollar covers them and explains why Tradergy does not forecast.

Sources

• International Monetary Fund, Data Brief: Currency Composition of Official Foreign Exchange Reserves - the US dollar at 57.13 per cent of foreign exchange reserves in 2026Q1 against 56.42 per cent in 2025Q4, the euro at 20.03 per cent against 20.38 per cent, and the attribution of about half the dollar's increase to exchange-rate valuation effects
• International Monetary Fund, COFER dataset - what COFER reports, the currencies covered, and the elimination of the unallocated portion from 2025Q3 applied back to 2000Q1
• Bank for International Settlements, Triennial Central Bank Survey - press release, 30 September 2025 - the dollar on one side of 89 per cent of foreign exchange trades in April 2025, the euro at 28.9 per cent and the yen at 16.8 per cent
• Judson, Ruth (2024), Demand for U.S. Banknotes at Home and Abroad: A Post-Covid Update, Federal Reserve International Finance Discussion Paper 1387 - about 60 per cent of US currency and about 70 per cent of hundred-dollar notes held abroad at the end of 2022, and the 50 to 60 per cent range across methods

General information about how a currency's international use is measured. Not financial advice, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.