US dollar's reserve share drops to 56%, but study reveals concentrated decline by China and Russia
Federal Reserve Bank of New York researchers say aggregate data masks a shift driven almost exclusively by China and Russia rather than a global trend.
Official foreign-exchange reserves held the US dollar at 56 percent last year, down from 64 percent ten years ago. This decline has led many to believe central banks are broadly diversifying away from the greenback. However, a new study by Linda S. Goldberg and Sneha Parthasarathy from the Federal Reserve Bank of New York challenges this widespread interpretation. The researchers argue that aggregate statistics often obscure specific actions taken by a few large countries.
Their analysis shows that roughly equal numbers of nations increased and decreased their dollar holdings between 2015 and 2019, contradicting the narrative of a unified global move away from the currency. Instead, the study identifies China and Russia as driving most of the active reallocation of reserves away from the dollar during 2015 to 2019. While the text notes that the trend continued from 2019 to 2023 with these two nations again involved, it confirms that few other countries are significantly reducing their holdings.
The researchers conclude there is little evidence of a widespread official diversification away from dollars globally. They suggest the observed decline reflects concentrated behavior by specific actors rather than a shift in market sentiment across international finance.
