Analysis of Dollar Asset Decline: Are Central Banks Really Divesting?

The dollar's influence in international finance has recently come into question, largely as evidenced by its share in global official foreign exchange reserves, which has decreased from 64 percent in 2015 to an estimated 56 percent in 2025. This downward trend might suggest an erosion of the dollar's position; however, a closer look reveals a more nuanced reality. The aggregate decline is primarily driven by a handful of significant reserve holders adjusting their portfolios, rather than a widespread abandonment of dollar holdings among the global community.

Analyzing the Dollar's Reserve Shares

The calculation of the dollar's share of global official foreign exchange reserves can often provide a misleading picture, as countries with larger reserves disproportionately influence the overall figure. As indicated by research conducted by Goldberg and Hannaoui (2026), there are two distinct mechanisms that can affect these numbers: the “preferences channel,” where countries actively choose to reduce their dollar-held assets in favor of other currencies, and the “reserve change channel,” where nations choose how much to change their overall reserves based upon different dollar share preferences.

From 2015 to 2019, the dollar's share declined by 3 percentage points, moderating to a 2 percentage point drop from 2019 to 2023. This raises an important question: Are numerous countries moving away from dollars in their reserves, or does this decline result from specific decisions made by a few major reserve holders? Interestingly, when looking at the changes across many countries, a similar number of nations either increased or decreased their dollar holdings, pointing toward a lack of a strong global trend.

Dissecting the Contributors to the Decline

During the 2015-19 period, a close examination of reserve portfolios from 79 countries reveals that the aggregate decline in dollar shares can be traced back to both the preferences and reserve change channels, with 1.2 and 1.5 percentage points of the decline, respectively. This statistical consolidation belies the reality that the decline is concentrated within a few key reserve holders. For instance, during this period, the decline in the dollar's reserve share was heavily influenced by China and Russia, which were chiefly responsible for observable decreases in dollar allocations.

Switzerland also appeared to contribute negatively during the reserve change channel, despite increasing its dollar holdings due to an accumulation of reserves that fell below the global average. Conversely, by tapping into greater reserves, countries such as Hong Kong and China had further implications for overall foreign exchange reserve distributions, exhibiting a unique duality in their contributions.

Recent Trends and Data Challenges

For the years 2019 to 2023, data availability proves to be problematic—specifically concerning major reserve holders like China and Russia, which did not report their dollar allocations during this timeframe. These omissions are particularly noteworthy, as these nations hold reserves corresponding to a significant portion of the entire remaining sample of 62 other countries combined. To address this issue, we can characterize these non-reporting countries as a consolidated group, implying they collectively carried substantial weight that would shape the observed decline in dollar shares. Based on reported behaviors, their preferences are anticipated to be markedly negative toward dollar holdings.

The countries with complete data for this period indicate a slight net increase in dollar allocations of 0.3 percentage points through the preferences channel, although the reserve change channel adds a modest negative contribution of 0.5 percentage points. Notably, revisiting these findings in the context of the omitted countries changes the narrative. The estimated contributions of the four unreported nations suggest that their impact alone could account for the majority of the overall decline during this period.

Contributions from Individual Nations

Within this framework, we observe that many countries yield minimal impact on large-scale dollar share changes. Countries like Brazil and Hong Kong, while they did reduce their dollar holdings, contributed only minimally to the observed decline. Meanwhile, Switzerland transitioned to a positive contributor, indicating a nuanced shift in its reserve management strategy, likely stemming from a contraction in overall reserves.

On the downside, Denmark and other countries such as Romania and Poland influenced the reserve change channel negatively, which could lead to further considerations regarding their management of foreign currency reserves. The observed slower pace in the decline of the dollar share may even indicate a potential stabilization process as countries recalibrate their overall reserve management strategies.

Future Outlook for Dollar Dominance

Looking ahead, there is little evidence to indicate that the falling dollar shares in official reserves signal a broad reassessment away from dollar assets among the global community. Instead, the primary drivers appear to be a few significant reserve holders making decisions based on specific economic circumstances. Countries still predominantly rely on dollar liquidity for reserves, driven by currency management and the need for a buffer against market shocks.

The concentration of changes among a small number of influential players underscores how aggregate data can obscure important trends. The study highlights the necessity for market participants and policymakers to interpret dollar share statistics carefully; while the seeming decline may forecast broader changes, the reality suggests that it’s predominantly the result of strategic adjustments by key nations rather than a substantial global shift.

In summary, while fluctuations in the percentage of dollar reserves highlight changing dynamics in international finance, the core creditability of the dollar remains largely intact among a vast majority of currencies. As central banks navigate their currency portfolios, keeping an eye on these concentrated movements will be vital for understanding the evolving landscape of global finance.

Linda S. Goldberg is a financial research advisor at the Federal Reserve Bank of New York.

Oliver Hannaoui is a former research analyst at the Federal Reserve Bank of New York.

Sneha Parthasarathy is a research analyst at the Federal Reserve Bank of New York.