Policy Uncertainties Trigger Drop in Dollar's Global Reserve Share
Global foreign exchange holdings swelled to $13 trillion during the third quarter of 2025, according to the International Monetary Fund's (IMF) Currency Composition of Official Foreign Exchange Reserves (COFER) database.
The dollar commanded 56.92% of international reserves during that period—down from 58.51% in the first quarter and 57.08% in the second quarter of 2025. The currency has witnessed a dramatic long-term contraction from its 71.19% share at the start of 1999.
Meanwhile, the euro's portion expanded from 19.12% in Q1 to 20.24% in Q2 before reaching 20.33% in Q3.
The Japanese yen's allocation dipped from 5.73% in the opening quarter to 5.65% in Q2, then rebounded to 5.82% in Q3.
The Chinese yuan climbed from 1.96% in Q1 to 1.99% in Q2 before retreating to 1.93% in the third quarter.
The currency's declining reserve status has sparked anxieties about whether the dollar can preserve its privileged position at the heart of the global financial architecture, though its supremacy in cross-border transactions remains intact.
The US represents roughly 10% of world trade, yet over half of all international commerce is invoiced in dollars. Despite some energy transactions migrating to alternative currencies, the vast majority of globally traded commodities carry dollar price tags.
The dollar continues as the predominant currency for international payments, comprising 50.49% of December 2025 totals, SWIFT data shows.
The euro captured 21.9%, the pound sterling represented 6.73%, the Canadian dollar held 3.44%, the Japanese yen accounted for 3.42%, and the Chinese yuan made up 2.72% of worldwide payments during the same timeframe.
Reserve Managers Pursue Diversification
Steven Kamin, a senior fellow at the American Enterprise Institute (AEI) and global macroeconomics specialist, told media that much of the dollar's reserve decline stems from managers incorporating non-traditional currencies like the Canadian or Australian dollar into their portfolios.
Kamin observed that certain countries, including Switzerland, that expanded their reserves maintain lower dollar allocations relative to other currencies.
He suggested the dollar's depreciating value could represent another factor behind its shrinking reserve presence.
Kamin emphasized that neither the euro, Chinese yuan, nor other currencies appear positioned to supplant the dollar as the preeminent global currency, with the greenback expected to retain its leadership role for the foreseeable horizon.
While the international monetary framework will evolve toward greater balance and multipolarity, the US dollar should remain the most critical currency, Kamin said.
Olu Sonola, head of US economic research at Fitch Ratings, told media that the dollar's reserve contraction resulted from policy uncertainty throughout the past year, encompassing tariff-induced volatility, Greenland-related risks, and current concerns over Japan's fiscal challenges and potential US involvement in stabilizing them.
Sonola noted the dollar's nominal value remains near the long-term average across 10-year and even 50-year periods, though marginal fluctuations have emerged, and this pattern will likely persist if policy uncertainties endure.
He emphasized the dollar may prove irreplaceable given the depth and liquidity of US credit and bond markets in the absence of viable alternatives.
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