Dollar share of global reserves at 28-year low – IMF – RT Business News

Russia’s currency asset freeze has accelerated global dedollarization, experts say

The process of diversification away from the greenback by countries around the world is accelerating, according to the latest data from the International Monetary Fund.

Statistics tracked by the Washington-based institution show the dollar’s share of official gold and foreign exchange reserves fell to a nearly three-decade low of 58% in the fourth quarter of 2022.

The move would have been gradual, and the dollar’s share of central bank foreign exchange reserves has now almost fallen to a level last seen in 1995.

The dollar’s longstanding status as the world’s dominant currency has steadily eroded in recent years amid concerns over soaring US debt and widely implemented sanctions using the currency as a lever.

The change was more pronounced after adjusting for exchange rates, according to Stephen Jen, CEO of Eurizon SLJ Capital Limited, quoted by Reuters.

“What happened in 2022 was a very big drop in the dollar’s share in real terms,” he said, calling the drop a reaction to the freezing of half of Russia’s $640 billion in gold and currency reserves.

According to Jen, this drastic measure has triggered a reflection in countries such as Saudi Arabia, China, India and Turkey on diversifying their reserves into other currencies.

The yuan’s share of global over-the-counter foreign exchange transactions has fallen from near zero 15 years ago to 7%, according to the Bank for International Settlements (BIS).

After the coup against Russia, other countries are wondering “What if you fall on the wrong side of sanctions?” BNY Mellon strategist Geoffrey Yu told the media.

He said global central banks were currently looking to diversify their assets, picking up corporate debt, tangible assets such as real estate and other currencies.

“It is the process that is underway” Mark Tinker, managing director of Toscafund Hong Kong, told the agency. “The dollar is going to be used less in the global system.”

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