Countries have stepped up efforts to move away from the greenback, data shows
The share of the US dollar in global foreign exchange reserves has dropped to its lowest in nearly 30 years, according to the latest data published by the International Monetary Fund (IMF).
The statistics tracked by the Washington-based institution show that the greenback’s share in official reserves dropped by 0.85% between July and September this year, and now stands at 57.4% – its lowest level since 1995. The IMF does not provide statistics for earlier years.
The IMF flagged the trend in June, when it noted in an official blog that the dollar’s decline was occurring amid diversification efforts by countries around the world. For instance, while data shows that the greenback’s share has been steadily dropping for the past three quarters, the share of “nontraditional” currencies has been gaining ground.
The greenback has also been ceding ground to the euro. In the third quarter, its share jumped to 20.02% compared to 19.75% in the second quarter. Global investmentsin the Japanese yen have surged for the past six quarters, with its share in Q3 amounting to 5.82%.
Data also showed a halt in the decline in the Chinese yuan’s share in global forex holdings, which lasted for nine quarters. In Q3, the yuan’s share rose to 2.17%.
Despite the downward trend, the dollar so far remains the preeminent reserve currency, IMF statistics show, with the euro firmly in second place.
The greenback’s long-standing status as the world’s dominant currency has been jeopardized in recent years amid concerns over soaring US debt and sanctions Washington has been placing on its rivals, including Russia.
As part of anti-Russia sanctions that followed the escalation of the Ukraine conflict in February 2022, the US cut off the country’s central bank from dollar transactions. It later banned the export of dollar banknotes to the country and spearheaded the drive to freeze Russian assets abroad. Foreign Affairs magazine wrote in June that the sanctions on Russia had “undoubtedly left other central banks wondering whether their own dollar-denominated rainy-day funds would be locked up should their governments run afoul of Washington.”
Meanwhile, sanctions have forced Russia to de-dollarize. According to September data, Moscow and its partners in the BRICS economic bloc are now using national currencies in 65% of mutual trade settlements. In a speech at the BRICS summit in Kazan in October, Russian President Vladimir Putin warned that Washington’s weaponization of the dollar through sanctions and denying countries access to the Western financial system was a “big mistake” that will force them “to look for other alternatives, which is what is happening.”
