According to the latest figures from the International Monetary Fund, countries worldwide are moving faster towards moving away from the dollar.
The Washington-based institution keeps track of data that show the dollar’s share of official gold and foreign currency reserves fell to 58% in the fourth quarter of 2022. This was the lowest level in almost 30 years.
The change is said to have happened slowly, and now the dollar’s share of central banks’ foreign funds is almost back to where it was in 1995.
In the past, the dollar was the most crucial currency in the world. However, in recent years, worries about rising US debt and widespread bans that use the dollar as leverage have made the dollar less critical.
Stephen Jen, CEO of Eurizon SLJ Capital Limited, as reported by Reuters, said that the change was more considerable when exchange rates were taken into account.
“In real terms, the dollar share fell very sharply in 2022,” he said, blaming the freezing of half of Russia’s $640 billion in gold and foreign exchange reserves.
Jen says that the drastic step caused countries like Saudi Arabia, China, India, and Türkiye to rethink their plans to spread their currency reserves into other currencies.
The Bank for International Settlements (BIS) says that the yuan’s part of global over-the-counter forex transactions has gone from almost nothing 15 years ago to 7% today.
After the move against Russia, other countries ask, “What if you fall on the wrong side of sanctions?” Geoffrey Yu, an analyst at BNY Mellon, told the press.
He said that central banks worldwide are trying to spread out their assets by buying business debt, real estate, and other currencies.
Mark Tinker, who is the managing director of Toscafund Hong Kong, told the outlet that this is the process that is going on. “In the world economy, the dollar will be used less and less.”
