Status of US Dollar as Global Reserve Currency: USD Share Plunges to Lowest since 1994, as USD Exchange Rates Tank, Central Banks Diversify

By Wolf Richter for WOLF STREET

The dollar’s status as dominant global reserve currency just took another steep dive. The share of USD-denominated assets held by other central banks plunged to 56.3% of total foreign exchange reserves in Q2, the lowest since 1994, from 57.8% in the prior quarter, according to IMF’s new data on Currency Composition of Official Foreign Exchange Reserves.

At the pace of the past five years, the dollar’s share might fall to 50% in another five years. Even at 50%, the dollar would still be the largest reserve currency, as all other currencies combined would weigh only as much as the dollar. But the long-term trend is clear – and this has significant long-term consequences for the US.