The Dollar's Share in Global Reserves Continues to Decline

The Dollar's Share in Global Reserves is Decreasing

The dollar, recognized as the primary reserve currency worldwide, has been continuing to lose its share in global reserves due to political uncertainties and countries' tendencies to diversify their reserves in recent periods.

Dollar's Global Share According to IMF Data

According to the International Monetary Fund's (IMF) Currency Composition of Official Foreign Reserves (COFER) data, by 2025, total global reserves are expected to rise to 13 trillion dollars, while the dollar's share in foreign currency reserves is recorded at 56.92%. This rate was 58.51% in the first quarter of 2023 and 57.08% in the second quarter.

The Rise of the Euro

Within the economic balances of the world, the share of the euro in reserves increased last year. The share, which was 19.12% in the first quarter of 2023, rose to 20.24% in the second quarter and 20.33% in the third quarter.

The Dollar Remains the Ruler of Global Payments

The decline of the dollar in reserves does not mean it will lose its status and importance in the global monetary system. Although trust in the dollar is questioned, it still continues to be the most used currency in global financial transactions.

Despite contributing 10% to the U.S. global trade, more than half of the trade is still invoiced in dollars. According to SWIFT data, in December 2023, the dollar's share in global payments was 50.49%.

The Impact of the Search for Diversity

Steven Kamin, a former expert at the U.S. Federal Reserve (Fed), stated that the decrease in the dollar's reserve share is due to reserve managers' quest for diversification and their inclusion of currencies other than the traditional ones. He also emphasized that while some energy payments are made in non-dollar currencies, most commodity prices continue to be determined in dollars.

The Role of Political Uncertainties

Olu Sonola, Managing Director of U.S. Economic Research at Fitch Ratings, pointed out political uncertainties as one of the main reasons for the recent declines. While tariff uncertainties and the complexity of international relations have not shaken trust in the dollar, this situation creates indirect effects.

Expectations for the Dollar's Future

When viewed from a longer perspective, the dollar's value remains close to its long-term average. Sonola expressed that expectations of other currencies surpassing the dollar are unrealistic, but fluctuations may occur.