From the Federal Reserve Bank of New York's Liberty Street Economics blog, September 2:
The dollar’s share of global official foreign exchange reserves fell from 64 percent in 2015 to 56 percent in 2025. This downward trajectory is sometimes read as evidence that the dollar’s role in international financial markets is eroding. However, aggregate statistics obscure the composition of changes occurring at the country level. In this post, we show that the aggregate decline is not a systematic global shift away from dollar assets. Rather, the aggregate decline reflects the actions of a handful of large reserve holders, changing either their currency preferences or the size of their reserve portfolio. From the perspective of the cross section of countries holding dollar assets, the dollar’s status in official portfolios is largely intact.
Understanding the Aggregate Dollar Shares of Reserves
When economists calculate the dollar share of worldwide official foreign exchange reserves, countries with larger reserve holdings naturally exert disproportionate influence on the final number. As Goldberg and Hannaoui (2026) show, this seemingly straightforward calculation can mask two fundamentally different phenomena. Countries can actively reallocate their existing portfolios away from dollar assets and toward other currencies, which we term the “preferences channel.” Alternatively, countries can accumulate or decumulate new foreign exchange reserves at dollar shares different from the global average, which we call the “reserve change channel.” When a country with below-average dollar holdings expands its reserves, it mechanically pulls down the global aggregate, even without reducing its own allocation to dollars. From this lens, we can interpret the evolution observed in the chart below, showing the currency composition of global foreign exchange reserves as reported by the International Monetary Fund (IMF)....***....Two distinct periods, selected for availability of data on individual country composition of foreign exchange reserves, illustrate what drives the aggregates. From 2015 to 2019, the dollar share fell by 3 percentage points. From 2019 to 2023, the decline moderated to 2 percentage points. The central question is whether these aggregate movements reflect a large set of countries systematically reallocating away from the dollar, or whether they stem from the actions of a few large reserve holders making choices specific to their own circumstances....
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