US dollar losing its global luster

In terms of payment amount, the euro surpassed the US dollar to become the largest payment currency in the world in May, accounting for 39.03 percent of the global total, with the US dollar accounting for 38.35 percent, according to data newly released by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

This is not the first time the euro has overtaken the US dollar in global payments－it did so for five consecutive months in 2013 after the European debt crisis eased and in October last year－so it is too early to claim that the euro is threatening the US dollar's dominance in the global currency market.

The fast rise of payments in the euro last month should be attributed to the European Union initiating the Next Generation EU plan, which will raise €800 billion ($955.2 billion) over the next five years to stoke the renaissance of the EU economy.

Internal payments within the eurozone account for a large share of the EU's global payments, and the US dollar remains the most popular currency for cross-border payments, investment and financing. According to SWIFT, the US dollar accounts for 42.2 percent of global trade, more than the aggregate of the euro, pound and yen, and its preponderance in North America and the Asia-Pacific payments is unquestionable.

As of the third quarter of last year, among the global foreign currency reserves, which totaled $11.47 trillion, more than 60.4 percent was in the US dollar and only 20.5 percent was in the euro.

However, some factors affecting the US dollar's global dominance have already appeared.

On the one hand, the market's faith in the US dollar is not as strong as before, as the limitless quantitative easing policy of the US Federal Reserve has made the currency depreciate 11 percent since March, promoting many to divert to the euro to hedge risks.

On the other, more and more countries refuse to pay with the US dollar. The oil-dollar exchange system is a main channel for the United States to maintain its currency hegemony, as it means by printing more bank notes, the country can automatically obtain more resources, commodities and services. Many countries sanctioned by the US have abandoned the US dollar in international trade. If Washington continues with its hegemonic approach in handling international relations, more countries will say no to the US dollar.