Recent data from the International Monetary Fund (IMF) has revealed a marginal decline in the US dollar’s share of global central bank reserves in the third quarter, marking a continuation of its long-term slide in dominance on the world stage. The greenback’s share slipped to 59.2%, down from 59.4% in the previous quarter, reaching its lowest level since last year’s fourth quarter.
While the US dollar maintains its position as the leading global reserve currency, its waning dominance is evident in the broader trend over the past decade. A decade ago, the US dollar accounted for more than 60% of global reserves and around 70% in 2000. In recent years, it has hovered around the 59% mark.
In contrast, the euro remains a distant second, comprising 19.6% of global central bank reserves, a slight decrease from the previous quarter. The Japanese yen saw a modest increase, growing to 5.5% from 5.3%, maintaining its third position.
The notable player in the reserve currency landscape is the Chinese yuan. Despite holding its share of global reserves steady, the yuan has been gaining traction in international payments. Last month, it reached a record high and became the fourth most-used currency, according to data from the SWIFT Financial System. China has actively pursued the internationalisation of its currency, engaging in cross-border yuan lending and establishing currency swaps with foreign central banks.
The recent imposition of Western financial sanctions on Russia has also contributed to the de-dollarization trend as more countries seek to reduce their vulnerability to currency actions. BRICS nations, including China, intend to challenge the dollar’s dominance, signalling a broader shift in global economic dynamics.
While the decline in the dollar’s dominance is evident, experts remain cautious about predicting full-blown de-dollarization. JPMorgan strategists noted in June that historical experience suggests dollar dominance may persist, even if China surpasses the US as the world’s largest economy around 2030. The complexities of global economic systems and the widespread use of the dollar in international trade continue to contribute to the greenback’s enduring significance.