BlockBeats report: On September 7, a recent study by the New York Fed found that although the U.S. dollar’s share of global official foreign exchange reserves has declined from 64% to 56% over the past decade, this shift does not indicate that central banks are systematically reducing their dollar holdings. Researchers stated there is little evidence of widespread official diversification away from the U.S. dollar.
Research shows that since 2015, the number of countries increasing and decreasing their U.S. dollar assets has been roughly equal during two distinct phases. The decline in the U.S. dollar’s reserve share has been driven primarily by concentrated portfolio rebalancing among a few large reserve managers, rather than broad-based global asset reallocation. Between 2015 and 2019, these changes were mainly driven by two central banks; from 2019 to 2023, Mexico and Morocco also became significant factors.
The New York Fed stated that adjustments to foreign exchange reserves in most economies still primarily serve conventional purposes such as meeting U.S. dollar liquidity needs, managing exchange rates, and responding to funding shocks, rather than actively avoiding the dollar.
In addition, IMF data also shows that the share of dollar reserves fell to its lowest level since 1995 in January, largely due to passive depreciation of reserve assets caused by a weaker U.S. dollar, rather than large-scale sales of dollars by central banks.