By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The U.S. dollar’s share of global currency reserves reported to the International Monetary Fund was 58.9% in the second quarter, unchanged from that of the first three months of the year, IMF data showed on Friday.
Claims in U.S. dollar rose 0.8% to $6.576 trillion in the second quarter, but was actually down 1% from a year earlier.
The euro’s share edged up slightly to 19.9% in second quarter, from 19.8% the previous three months. Claims in euros grew 1% in the quarter, but increased 2% from a year earlier.
“The dollar is still the dominant currency in foreign exchange and international funding. Its share of over-the-counter FX transactions has remained remarkably stable,” wrote Michael Langham, emerging markets analyst, at abrdn, in one of his latest pieces on the future of the U.S. currency’s influence.
But he pointed out that the greenback’s share of currency reserves has been on a “gradual downward trend”, falling over 10 percentage points over the past 20 years. Much of this shift, he said, has been driven by a rotation into other developed market currencies, such as the euro, British pound, Canadian dollar and Australian dollar. The Chinese renminbi has also snagged a share of the reserves, but from a very low base.
That said, Langham noted there is a high bar for risks on the dollar to threaten its dominance.
Global reserves, which are reported in U.S. dollars, are central bank assets held in different currencies used in part to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.
The dollar index was up 3.1% in the second quarter, recovering from a 0.9% fall in the first quarter. In the fourth quarter of 2022, the dollar index dropped 7.7%.
The euro, on the other hand, slid 3.1% in the quarter, after rising 1.2% in the first three months of the year. It surged 9.3% in the last three months of 2022.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by David Gregorio)
