Dollar Reserve Share Erodes as Capital Seeks Quality in Smaller Currencies

The US dollar's share of global foreign exchange reserves has been steadily eroding over the past quarter century, from around 71% at the turn of the century to approximately 57.7% by early 2025.

This decline is not a sudden collapse, but rather a slow and structural shift that has been unfolding across decades.

The most common assumption about dollar reserve decline is that it's being replaced by the euro or Chinese renminbi, but the data reveals that this isn't entirely true.

While the euro has captured essentially zero net ground from the dollar's retreat, and the renminbi has absorbed roughly one quarter of what the dollar has lost, the remaining three quarters have dispersed into smaller, well-governed economies such as Australia, Canada, New Zealand, Singapore, South Korea, and the Nordic nations.