US dollar share in central banks’ reserves declines, IMF says

The International Monetary Fund’s (IMF) data revealed that the US dollar’s share of global central bank reserves fell during the third quarter of this year, as opposed to increasing the share of the Japanese yen.

The US dollar accounted for 59.2% of the world’s allocated foreign exchange reserves during the three months ending in September, down from 59.4% in the previous three months, according to International Monetary Fund data for official foreign exchange reserves.

This ratio is the lowest since the last quarter of last year.

The euro’s share of reserves also fell slightly from 19.7% to 19.6%, while the Japanese yen’s contribution rose from 5.3% to 5.5%.

The shares of the Chinese yuan, sterling, Australian dollar, Canadian dollar, and Swiss franc have not changed significantly. A range of “other currencies” in reserves grew from 3.6% to 3.9% during the previous quarter.

Although the US dollar has traditionally been the preferred reserve currency for the majority of central banks globally because of its widespread use and stability in global markets, it has gradually lost its dominance since the beginning of the current millennium, when its share was over 70%.

The US dollar’s advantage has helped the US control funding costs and manage budget deficits, with trading partners pumping their dollars into US government bonds.