A new analysis finds the US dollar remains the primary global reserve currency but its proportion of worldwide holdings has fallen significantly in recent decades. According to data from the Atlantic Council, the greenback’s share dropped to 58% in 2024 from 72% in 2002.
The report cites growing diversification efforts away from dollar-denominated assets, accelerated since Russia’s invasion of Ukraine and heightened use of sanctions. China in particular has expanded alternatives like its digital currency payment platform CIPS and currency swaps with trading partners.
BRICS nations promoting intra-bloc trade in national currencies pose a challenge. Among emerging market currencies, the renminbi shows potential to rival the dollar but recent Chinese economic woes saw its reserves share decline.
Central banks are increasingly turning to gold, with purchases tripling its weighting in foreign reserves since 2019. The precious metal provides a stable hedge against sanctions, inflation and currency volatility. Nontraditional assets like Australia and Canada’s dollars are also attracting reserve managers.
While the greenback’s role in debt markets, banking and commodities keeps it dominant in the near-term, the IMF agrees its portion of allocated reserves continues falling gradually. Digitalization is empowering more diversified portfolio choices as geopolitical risks rise globally.
