Dollar dominance fading? IMF data reveals falling share of US currency in global reserves

IMF data shows the US Dollar is slowly losing its grip as the world’s reserve currency.

It’s still the most held reserve currency but has been declining for 20 years.

This trend continues even with the dollar strengthening recently.

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Central banks are diversifying their reserves, going into non-traditional currencies like the Australian dollar, Canadian dollar and Chinese yuan.

It’s all about yield, diversification and ease of trading with new digital tech.

Some think geopolitical tensions will speed up the decline of the dollar’s reserve status.

But data shows this trend is bigger than just a few big reserve holders and includes most G20 economies.

China has actively promoted the internationalisation of its currency.

But despite that, the yuan’s share of global reserves has plateaued recently, mostly because of the recent depreciation of the currency.

US financial sanctions have also impacted reserve management decisions.

Central banks are slowly shifting away from currencies under sanctions, towards gold.

Gold’s share of global reserves is still low historically,

But some emerging market central banks are accumulating gold as a hedge against economic and geopolitical risks.

IMF says the decline of the dollar’s dominance is a long-term process, not a sudden drop.

While the dollar is still the most important reserve currency, central banks are looking to diversify their holdings.

This ‘de-dollarisation’ trend is driven by yield, tech and geopolitical risk.

Diversification is happening beyond major countries like Russia & China. 46 G20 countries are currently leading this shift away from dollar.