Dollar Decline Not Necessarily a Sign of De-Dollarization

The decline in the US dollar's share of global foreign exchange reserves has been overstated, according to researchers at the New York Fed. The dollar's share fell to 56% in 2025 from 64% in 2015, but this decrease is largely attributed to a few countries.

China and Russia were responsible for most of the foreign exchange reserves that switched out of dollar assets between 2015 and 2019. From 2019 to 2023, China, Russia, Mexico, and Morocco led the decline in the dollar's share.

The researchers analyzed the data and found that among remaining countries, the numbers that increased and decreased dollar holdings have been almost the same since 2015. This suggests that there is little evidence of a broad trend towards de-dollarization.

The reasons countries convert foreign exchange reserves into currencies other than the dollar vary, with objectives such as securing liquidity, managing exchange rates, and preparing for funding shocks affecting currency composition.