Why Countries That Are Not America Still Trade in Dollars
A Malaysian exporter can sell to a Brazilian importer and write the price in US dollars. Neither side is American. The currency is doing a third job: coordinating a global network.
The contract can use either currency—or a vehicle currency both sides already know how to price, obtain and hedge.
Imagine an electronics company in Penang selling components to a factory in São Paulo. The exporter keeps its accounts in ringgit. The importer earns reais. Yet the invoice may say US$100,000. No goods enter the United States and no American buyer signs the contract.
The dollar here is a vehicle currency: a shared unit used between parties whose own currencies are different. That choice is not merely tradition, and it is not the same thing as holding physical dollar notes. It sits inside a mutually reinforcing system of prices, foreign-exchange markets, bank accounts, credit and risk management.
One payment contains three decisions
The currency printed on an invoice is the unit of account: it fixes what is owed. Settlement is the transfer that discharges the debt. Funding is how the buyer obtains the money before payment. These layers often align, but they do not have to. A firm might invoice in dollars, hedge the exposure with a forward contract and ultimately fund itself from local-currency revenue.
Choose the invoice language
Each option moves exchange-rate risk to a different place.
The invoice preserves the seller’s ringgit revenue while the buyer manages BRL/MYR risk.
Why coordinate on the dollar? Because other participants already do. Commodity benchmarks are commonly quoted in dollars. Suppliers price inputs in dollars. Banks lend dollars. Derivatives markets hedge dollars. Accountants and treasury teams build processes around dollars. Each user makes the currency more useful to the next.
Start the dollar loop
A common currency reduces the number of bilateral conventions that firms must maintain.
The shortest financial route can have two legs
A direct market between two currencies may trade only lightly. Few buyers and sellers mean wider spreads and less capacity for a large order. Instead, a dealer can exchange ringgit for dollars, then dollars for reais. That looks indirect, but two liquid markets can be cheaper and easier to hedge than one thin market.
Cross through the liquid centre
The dollar acts as a bridge when its two component markets offer more depth.
The scale is extraordinary. In the BIS survey for April 2025, the dollar was on one side of 89.2% of all foreign-exchange trades.2 Currency shares sum to 200%, not 100%, because every trade exchanges one currency for another. The statistic measures the dollar’s position at the centre of dealing—not the US share of world trade.
International money moves through ledgers
A foreign bank cannot settle a dollar payment simply by editing its own books if the recipient uses another banking group. Banks hold accounts with other banks, known as correspondent accounts. A payment can travel from the buyer’s bank through one or more intermediaries to the seller’s bank, with screening, messaging, liquidity and reconciliation at each step.
Trace a dollar payment
The payment begins as a bank liability, not a parcel of notes crossing a border.
Invoicing, settlement and reserves are different uses, but the system connects them. Central banks hold liquid foreign assets partly so they can intervene in markets and meet external needs. The IMF reported that dollars represented 57.13% of world foreign-exchange reserves in 2026 Q1; valuation changes explained around half of that quarter’s increase.1 The Federal Reserve’s 2025 review placed the dollar at about half of international SWIFT payments, while warning that the underlying datasets arrive with lags.3
Do not combine the percentages
A private convention creates public consequences
If a company earns local currency but owes dollars, a stronger dollar increases the local-currency burden. If dollar funding becomes scarce, banks and firms far from the United States can face stress. Dollar pricing also changes how exchange-rate movements pass through to import prices and trade. IMF research calls this the dominant currency paradigm.6
Send a dollar shock outward
A movement in the vehicle currency can alter costs, debt burdens and financial conditions across many economies.
Centrality also creates geopolitical leverage. Dollar payments that touch the US financial system can encounter US law, compliance controls and sanctions. But currency alone does not describe every legal risk: particular sanctions can reach significant non-dollar transactions too. Switching the invoice label is therefore not a universal escape hatch.7
Reveal what the currency connects
Can the network change?
Yes—but not by announcement alone. Firms can invoice in euros, renminbi or local currencies. Central banks can diversify reserves. Countries can build payment links and swap arrangements. The IMF’s 2025 study of 132 countries found that global invoicing shares remained broadly stable through 2023, even as renminbi use grew and some patterns fragmented along geopolitical lines.4
A challenger must offer more than a payment rail. It needs widely trusted assets, accessible markets, predictable convertibility, hedging instruments, credit and enough counterparties willing to use it at the same time. The incumbent’s advantage is not that change is impossible. It is that every layer must change together.
Find the deepest explanation
The dollar travels because a price, a hedge, a loan and a bank account already expect to meet it.