New York Fed: Decline in Dollar Reserves Not Due to Systemic Selling

Huoxing Finance reports that, on September 7, a recent study by the New York Fed found that although the U.S. dollar’s share in global official foreign exchange reserves has declined from 64% to 56% over the past decade, this shift does not indicate a systematic reduction in dollar assets by central banks worldwide. Researchers noted there is little evidence of widespread official efforts to diversify away from the dollar. The study shows that, across two distinct periods since 2015, the number of countries increasing and decreasing their dollar holdings was roughly equal. The decline in the dollar’s reserve share has been driven primarily by concentrated portfolio adjustments from a few large reserve managers, rather than broad-based global asset reallocation. Between 2015 and 2019, these changes were largely driven by two central banks; from 2019 to 2023, Mexico and Morocco also became significant factors. The New York Fed stated that most economies continue to adjust their foreign exchange reserves primarily for conventional purposes—such as managing dollar liquidity, exchange rate stability, and responding to funding shocks—rather than actively avoiding the dollar. Additionally, IMF data shows that the dollar’s reserve share fell to its lowest level since 1995 in January this year, largely due to passive depreciation of reserve assets caused by a weaker U.S. dollar, rather than large-scale selling by central banks.