US dollar's share of global reserves shrinks amid policy uncertainty

WASHINGTON / ISTANBUL

The share of US dollars in global reserves is on the decline due to policy uncertainties, as countries seek to diversify their reserves.

The global reserves surged to $13 trillion in the third quarter of 2025, according to data from the International Monetary Fund (IMF) Currency Composition of Official Foreign Exchange Reserves (COFER).

The share of the dollar in global foreign exchange reserves was 56.92% during this period. The share was 58.51% in the first quarter of 2025 and 57.08% in the second quarter of last year.

The share of the US dollar in global foreign exchange reserves declined from 71.19% at the beginning of 1999 over the years.

At the same time, the euro’s share rose from 19.12% in the first quarter of 2025 to 20.24% in the second quarter and 20.33% in the third quarter.

The Japanese yen’s share fell from 5.73% in the first quarter of 2025 to 5.65% in the second quarter and climbed to 5.82% in the third quarter.

The share of Chinese yuan in global foreign exchange reserves climbed from 1.96% in the first quarter to 1.99% in the second quarter, but it fell to 1.93% in the third quarter.

The fall of the US dollar in global reserves fueled the concerns that the currency may not be able to maintain its reserve currency status and its central position in the global monetary system, but its dominance in financial transactions worldwide still continues.

The US accounts for approximately 10% of global trade, with more than half of all transactions billed in US dollars. While some energy payments have shifted to other currencies, the majority of commodities traded globally are priced in US dollars.

The US dollar remains the most widely used currency in global payments, making up 50.49% of the total in December last year, according to SWIFT data.

The euro made up 21.9%, the pound sterling accounted for 6.73%, the Canadian dollar’s share was 3.44%, the Japanese yen constituted 3.42%, and the Chinese yuan comprised 2.72% of global payments over the same period.

Reserve managers seek to diversify reserves

Steven Kamin, a senior fellow at the American Enterprise Institute (AEI) and a global macroeconomics expert, told Anadolu that a large part of the US dollar’s decline in reserves was due to reserve managers seeking to diversify with the addition of non-traditional currencies like the Canadian or the Australian dollar to their reserves.

Kamin noted that some countries, like Switzerland, that grew their reserves have a lower share of the US dollar compared to other currencies.

He mentioned that the dollar’s losing value could be another reason why it’s shrinking in global reserves.

Kamin stated that the euro, the Chinese yuan, or other currencies may not replace the US dollar as the dominant global currency, as the dollar is expected to remain in its leading position in the foreseeable future.

While the global monetary system will move towards a more balanced and multipolar world, the US dollar is expected to remain the most important currency, Kamin said.

Olu Sonola, head of US economic research at Fitch Ratings, told Anadolu that the fall of the US dollar in global reserves was due to policy uncertainty over the past year, including tariff-induced uncertainties, Greenland-related risks, and now uncertainties over Japan’s fiscal problems and the potential role of the US in stabilizing them.

Sonola stated that the US dollar’s nominal value is still close to the long-term average for a 10-year and even a 50-year period, but there have been some variations in the margins, and this trend is likely to continue if policy uncertainties continue.

He added that the US dollar may not be replaced in the future as the deep, credit, and bond markets in the US support the US dollar in the absence of an alternative.