A vehicle currency is a currency used as the common intermediary for trades between two other currencies, because routing through it is cheaper and more liquid than dealing directly. In today’s FX market that role belongs overwhelmingly to the US dollar, which is on one side of 89.2% of all trades (BIS, April 2025).
Why Do Vehicle Currencies Exist?
Liquidity begets liquidity. Thousands of currency pairs are theoretically tradable, but flows concentrate in a handful of deep markets. A company converting euros to Mexican pesos will rarely find a deep, direct EUR/MXN market — quotes exist, but spreads are wide. Two liquid hops are cheaper than one illiquid one, so the trade routes through the deepest market of all: the dollar.
How a Trade Routes Through the Dollar
The bank handling that euro–peso conversion sells euros for dollars in EUR/USD and buys pesos with dollars in USD/MXN. The customer sees a single all-in cross rate; the two dollar legs net off inside the bank’s book. Multiply that pattern across the market and the dollar becomes the hub through which most of the world’s currency flow passes.
How Dominant Is the Dollar?
Measured across both sides of every trade, the dollar appeared in 89.2% of all FX transactions in April 2025, all ten of the most traded currency pairs involve it, and EUR/USD alone accounts for roughly a fifth of global turnover. The dominance is self-reinforcing: everyone routes through the dollar because everyone else does, which keeps its markets the deepest and its costs the lowest.
Are There Other Vehicle Currencies?
Regionally, yes. The euro plays the role within Europe, and sterling held it globally before the dollar displaced it in the twentieth century. The Chinese renminbi’s share of turnover has climbed steadily — 8.5% in the 2025 survey — but capital controls still limit its use as a true vehicle. For the wider picture of how the market fits together, see What Is the FX Market and Why Does It Matter?
Related Terms: Cross Rate, Base and Quote Currency, Exchange Rate, Liquidity. See the full glossary for more.
This is educational content, not financial or trading advice.