Dollar's Global Reserve Share Hits 30-Year Low, but De-Dollarization Appears Limited
The U.S. dollar’s share of global foreign exchange reserves fell to around 56% in 2025—the lowest level in roughly three decades—raising concerns about de-dollarization trends. However, new research from the New York Fed suggests that this decline is largely driven by a small number of large reserve holders rather than widespread rejection of dollar assets. The study found limited evidence of coordinated global action against the dollar; instead, countries like China and Russia appear to be responsible for most of the shift in currency preferences. Additionally, exchange rate fluctuations significantly affect how changes in reserves are perceived, often exaggerating apparent declines or increases in the dollar’s share when measured solely by value. While geopolitical tensions have encouraged some central banks to diversify their holdings into gold and other currencies, no clear alternative has emerged as a dominant reserve currency yet. The data suggests that while the dollar's dominance is eroding slowly, it remains far from being replaced on a global scale.
Topics: Central Banks De-Dollarization Foreign Exchange Reserves U.S. Dollar