Dollar's declining reserve share reflects few countries' choices, not global shift, NY Fed says

The Federal Reserve Bank of New York said a drop in the dollar's share of global foreign exchange reserves should not be read as evidence of a worldwide de-dollarization movement.

The dollar accounted for 56 percent of global foreign exchange reserves last year, down sharply from 64 percent in 2015. That figure is often cited as evidence of a broad shift away from the dollar.

But New York Fed researchers Linda Goldberg and Sneha Parthasarathi said in a blog post last week that the change may reflect the actions of a small number of countries rather than a sweeping reallocation of reserve currencies.

Most of the reserves actively shifted out of dollars and into other currencies between 2015 and 2019 came from China and Russia. From 2019 to 2023, China, Russia, Mexico and Morocco were the main drivers of the change. Among other countries, the number that increased dollar holdings since 2015 was roughly equal to the number that reduced them.

Bloomberg reported Monday (local time) on the analysis, citing the researchers' conclusion that there is "little evidence of a broad-based decline in the dollar's share of reserves" and that aggregate statistics can be misleading when a small number of major countries make concentrated moves that appear to reflect a general trend.

The researchers also said shifts away from the dollar in reserve portfolios reflect individual countries' needs — such as securing liquidity, managing exchange rates or hedging against funding shocks — rather than a coordinated global strategy. "These factors remain powerful," they said, adding that fluctuations in reserve shares "appear to be cyclical, driven by country-specific management needs rather than a systematic de-dollarization movement."

Meanwhile, a separate study released in June found that most central banks around the world plan to reduce their long-term exposure to the dollar.