Dollar Decline Not as Widespread as it Seems

The decline in the US dollar's share of global foreign-exchange reserves has been exaggerated, according to a New York Fed study. The research found that while dollar holdings have fallen from 64% a decade ago to 56% last year, this shift is largely concentrated among a few countries.

China and Russia were responsible for most of the active reallocation away from the dollar between 2015 and 2019. In the following period, from 2019 to 2023, China and Russia again featured prominently, alongside Mexico and Morocco.

The researchers argued that aggregate statistics can obscure what is happening beneath the surface, leading to misleading impressions of broad trends. They suggested that changes in dollar holdings are more closely tied to individual reserve-management requirements than a coordinated effort to reduce exposure to the US currency.