The (Declining) Status of the US Dollar as Global Reserve Currency: Central Banks Diversify into other Currencies & Gold

By Wolf Richter –  WOLF STREET

The dollar’s status as dominant foreign exchange-reserve currency has been diminishing for years as central banks have been diversifying to other currencies and over the past three years massively into gold. The decline of the dollar has been slow and halting, a couple of steps forward, one step back, sometimes bigger steps, other times smaller steps, and it remains by far the dominant global reserve currency. But the long-term trend is clear – and this has significant long-term consequences for the US.

The share of USD-denominated foreign exchange reserves declined to 57.7% of total foreign exchange reserves in Q1, according to IMF’s data today. In Q3 2024, the dollar’s share had dropped to a 30-year low.