The U.S. dollar has been the cornerstone of the global financial system since the 1944 Bretton Woods Agreement established it as the world’s primary reserve currency. This status has made it the most widely held currency by central banks and governments, relied upon for international trade, investments, and as a refuge during economic turbulence. As of April 7, 2025, the dollar remains dominant, but emerging trends suggest its preeminence may be waning, prompting questions about whether it’s losing its grip.
According to the latest data from the International Monetary Fund (IMF), the dollar’s share of allocated global foreign exchange reserves dipped to around 58% in 2024, down from a peak of 71% in 1999. This gradual decline reflects a deliberate diversification by central banks into other currencies. However, this shift isn’t predominantly boosting traditional competitors like the euro, which holds steady at about 20%, or the Japanese yen, at roughly 6%. Instead, “nontraditional” currencies—such as the Australian dollar, Canadian dollar, Chinese renminbi, and South Korean won—are gaining traction, with their collective share increasing over the past two decades. The renminbi, for example, has risen to approximately 3% of reserves, though its growth is constrained by China’s tight capital controls.
Geopolitical dynamics are a key driver of this trend. U.S. sanctions, notably against Russia following its 2022 invasion of Ukraine, have spurred some nations to seek alternatives to reduce their dependence on the dollar. The BRICS bloc—Brazil, Russia, India, China, and South Africa—has explored trading in local currencies or even developing a shared currency, though experts highlight significant hurdles, including economic disparities and weak monetary frameworks among these nations. Despite such ambitions, the dollar retains its edge, underpinning about 88% of global foreign exchange transactions—a figure that has barely budged in recent years—thanks to its unparalleled liquidity and the depth of U.S. financial markets.
Beyond currencies, central banks are also turning to gold and, to a lesser extent, digital assets. Gold holdings have surged among emerging markets like China and Russia since the 2008 financial crisis, serving as a hedge against dollar-centric vulnerabilities. Meanwhile, cryptocurrencies like Bitcoin are frequently touted as potential disruptors, though their volatility and lack of scalability keep them on the fringes of serious reserve consideration.
Looking forward, the dollar’s dominance isn’t poised for an abrupt collapse. Analysts foresee a continued slow erosion, possibly hastened by U.S. fiscal challenges—public debt is projected to reach 116% of GDP by 2034—or escalating geopolitical fragmentation. A multi-currency reserve system might emerge, with the dollar sharing the stage rather than exiting it entirely. For now, its entrenched role in global trade, exemplified by oil pricing, and the trust in U.S. institutions ensure it remains the financial world’s linchpin, even as nations explore their options. The question lingers: is this a temporary adjustment, or the beginning of a more profound shift? Only time will tell if the dollar’s grip is truly slipping.
FYI: International Monetary Fund
The International Monetary Fund (IMF) provides data on the currency composition of official foreign exchange reserves through its Currency Composition of Official Foreign Exchange Reserves (COFER) database. This data details the proportion of various currencies, including the U.S. dollar, held by central banks and monetary authorities worldwide. According to the COFER data, the share of U.S. dollars in global foreign exchange reserves has experienced a gradual decline over the past few decades. Specifically, the dollar’s share decreased from approximately 71% in 1999 to 59% in 2021. In the third quarter of 2024, the U.S. dollar’s share reached a record low of 57.3%, before slightly increasing to 57.8% in the fourth quarter.
For a comprehensive year-by-year breakdown of the U.S. dollar’s percentage share in global reserves from 1999 to 2024, accessing the IMF’s COFER database directly is recommended. The COFER database offers detailed quarterly data on the currency composition of official foreign exchange reserves, which can be aggregated to obtain annual figures. The database is accessible through the IMF’s data portal at https://data.imf.org/COFER.
It is important to note that the COFER data is reported on a voluntary and confidential basis by central banks from over 140 economies. While the IMF publishes aggregate data for each currency, individual country data remains strictly confidential. Therefore, the figures represent the collective reporting of participating economies and may not encompass the entirety of global reserves.
The observed decline in the U.S. dollar’s share of global reserves over the years reflects a diversification trend among central banks. Factors contributing to this trend include efforts to mitigate risks associated with currency concentration and to accommodate the growing economic influence of other currencies. Despite this gradual decrease, the U.S. dollar continues to hold the largest share of global foreign exchange reserves, underscoring its enduring role in the international financial system.
