LONDON: The use of the euro as a global payment currency dwindled last month, reaching the smallest share in more than two years, as the common currency comes under pressure amid a strengthening US dollar.

Payments using the euro dropped to 34.5% of the market in August, a full percentage-point lower from the previous month, according to data from the Society for Worldwide Interbank Financial Telecommunications, or Swift, a global financial messaging firm.

Meanwhile, the dollar has been gaining share since May and remained in the top spot for the 15th consecutive month with a 42.6% share, the report showed.

As Europe teeters on the brink of recession amid record inflation and an energy crisis worsened by Russia’s escalating war in the Ukraine, the euro has lost its appeal for use in deals.

Instead, investors are fleeing to the safety of the dollar and further cementing its place as investors’ currency of choice. The greenback has been dominating global payments, for the most part, since 2013.

Such moves have also pushed the gap between payments in the two currencies to the widest in nearly two and half years as the euro’s proportion of payments fell to the lowest since June 2020.

The spread has broadened from just over one percentage point in February to more than eight percentage points in August.

That falls in line with the euro’s more than 12% depreciation against the dollar this year.

Still, despite usage falling for the third straight month, the euro held onto its spot as the second most used legal tender in the world after the greenback, keeping ahead of currencies like the British pound and the Japanese yen.

Elsewhere, the Chinese yuan’s share of transactions rose to the highest since January at 2.3%, even as the country grapples with an economic slump.

And the use of the Canadian dollar was the worst since February 2018. The loonie has slumped over the past week.

 - Bloomberg